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Credit Suisse AT1 holders' billions of debt challenged in Swiss court

The Swiss administrative court has received four filings linked to the additional-tier 1 debt writedown, a spokesperson said on Thursday declining to give any detail

Credit Suisse

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By Karin Matussek and Lucca de Paoli
 
The Swiss finance watchdog is facing a handful of court challenges over the controversial decision to wipe out billions of Credit Suisse Group AG debt last month. 
 
The Swiss administrative court has received four filings linked to the additional-tier 1 debt writedown, a spokesperson said on Thursday declining to give any detail on who the claimants are and what they are seeking.

The notes were valued around $17 billion before they were written down to nothing after the hastily arranged, Swiss government-brokered deal that saw UBS Group AG buy Credit Suisse. A spokesperson for Finma declined to comment.

Bondholders have argued that they were treated unfairly, and pointed to a law that was changed the day before the notes were written off. The government move flipped the general convention of how to manage an insolvency event on its head, by hitting debt holders with losses before equity. That has thrown up a unique legal situation that’s left everyone from institutional investors to wealthy bank clients looking at different ways to claw back their money. 

Mitsubishi UFJ Financial Group Inc.’s clients lost more than $700 million on the wipeout while Pacific Investment Management Co. was among the largest holder of the notes with $807 million of the securities.

Law firms Quinn Emanuel Urquhart & Sullivan and Pallas Partners have both been rallying aggrieved bondholders since the deal last month.

Finma defended its decision to wipe out AT1 holders, saying that provisions that allowed for the writedown were in the prospectus of the document. 

After the wipeout, some investors purchased claims on the notes at rock-bottom prices, waging that litigation could return them multiples on their investments at some point in the future. 

Marathon Asset Management LP, Redwood Capital Management LLC and Sona Asset Management were among funds buying Credit Suisse’s AT1 bonds in the aftermath of the UBS deal.

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First Published: Apr 20 2023 | 5:14 PM IST

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