Credit Suisse, Ubs and At1 bonds: here’s what can happen
One of the solutions made in the “rescue” of the Swiss credit was the immediate and net cancellation of the AT1 bonds (Additional Tier One). What are? I am financial debt instruments with a lower credit rating that a bank can issue. They have no maturity date (they are perpetual with the possibility of early repayment) and they have the purpose of absorbing losses without affecting the entity’s operations.
In case of deterioration of the position of solvencythe coupons are canceled or the principal is temporarily or permanently converted into principal or shares of the bank. AT1 bonds: what they are and what risk they involve – FundsPeople ItaliaThe method by which the aforementioned bonds were canceled did not please the holders, even if they know very well what the “high” risks of owning these bonds are, commonly known because they have a high yield .
Usually, to see them permanently canceled from the balance sheets, the issuing institution would have to be declared bankrupt and this is not our case. What does all this entail? An amount of around Chf 16 billion is not an amount that goes unnoticed or does not weigh in the issuer’s portfoliobut this generates, in the owners, the request for a retaliation and, in this regard, the request to specialized International Law Firms to sue whoever canceled the bonds. The question is: is it really worth taking on a lawsuit, which could take a long time, and perhaps be forced to repay not only the lost interest, but also the capital and at the same time any compensation?
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