Rules For Thee but Not for Me: Holders of AT1 Credit Suisse bonds get nothing as shareholders get billions

Quick Take

• As UBS bought out Credit Suisse for $3.2 billion yesterday, stocks head lower in pre-market moves.
• This is a 73% discount on Friday on Credit Suisse’s closing price.
• The biggest losers of this trade were the holders of Additional Tier 1 (AT1) bonds. This a debt instrument where holders are repaid before shareholders.
• But that didn’t happen as Credit Suisse confirmed shareholders would get $3 billion, and $17 billion of AT1 holders would get nothing.
• In a Bloomberg article.”Wiping out AT1 holders while paying substantial amounts to shareholders goes against all the resolution principles and rules that were agreed internationally after 2008.”
• Could other countries repeat the same as what the Swiss government did?

Pre Market Moves

• UBS: -4%
• Credit Suisse: -7%
• First Republic: -33%
• Deutsche Bank: -2%

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