UBS has issued its first Additional Tier 1 (AT1) bonds since taking over Credit Suisse in March, when $17bn worth of these instruments were wiped out as part of the rescue deal.
A spokesperson for UBS confirmed to International Investment's sister brand Investment Week that the firm is offering AT1 securities, and that additional information will be provided when the offering is complete.
According to a report by the FT , UBS launched a deal to raise new dollar AT1 bonds today (8 November), splitting the debt into two tranches that can be redeemed in either five or ten years.
According to a separate report by Bloomberg, the deal may price today, with initial price discussions at about 10% for the shorter tranche and around 10.125% for the longer one.
UBS mulls first AT1 bonds sale since Credit Suisse takeover - reports
Holders of $17bn of Credit Suisse's AT1 bonds had their holdings wiped out as part of the historic takeover of the bank by UBS, a move that had sparked controversy across European debt markets.
The decision came as a surprise, given unsecured bondholders traditionally rank above equity holders in the capital structure, and forced the Bank of England and EU regulators to step in with veiled disagreements to the Swiss regulator's move.
The AT1 bonds were issued by Credit Suisse as part of its capital structure to meet regulatory capital requirements and contained a clause allowing Swiss authorities to write them off regardless of what happened to the shares if the bank fell insolvent.
What are AT1 bonds and why is Credit Suisse's $17bn wipe-out controversial?
Through a number of lawsuits, bondholders are contesting the legitimacy of FINMA's decision to pass through last-minute legislation to write down the bonds, which they claim upended the established capital hierarchy.
In September, the FT reported that UBS was under pressure to replace up to $17bn of Credit Suisse AT1 bonds in coming years in a bid to increase the efficiency of the enlarged bank's capital structure and free up cash for shareholder payouts and possible acquisitions.
The market had a comeback during the summer, and European banks such as BNP Paribas, BBVA, Bank of Cyprus and Société Générale have since started offering new AT1 instruments.
