Update (1500ET): We finally have a deal, and what was at first a CHF1 BN acquisition price of Credit Suisse by UBS, which then rose to CHF 2 BN, has now cranked up one final time to CHF 3BN (US$3.25 billion), or 0.76 per share, specifically shareholders of Credit Suisse will receive 1 share in UBS for 22.48 shares in Credit Suisse. As part of the deal, the Swiss National Bank is offering a 100 billion-franc liquidity assistance to UBS while the government is granting a 9 billion-franc guarantee for potential losses from assets UBS is taking over, i.e., this is a taxpayer-backed bailout.
More importantly, however, the bank’s entire AT1 tranche – some CHF16BN of Additional Tier 1 (AT1) bonds, a $275BN market – will be bailed in and written down to zero, to wit: “FINMA has determined that Credit Suisseâs Additional Tier 1 Capital (deriving from the issuance of Tier 1 Capital Notes) in the aggregate nominal amount of approximately CHF 16 billion will be written off to zero.”
This wipe out, pardon, bail-in is the biggest loss yet for Europeâs $275 billion AT1 market, far eclipsing the approximately âŹ1.35 billion loss suffered by junior bondholders of Spanish lender Banco Popular SA back in 2017, when it was absorbed by Banco Santander SA to avoid a collapse.
Read Full Article Here…(zerohedge.com)
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