Credit Suisse said to push back against UBS’s US$1 billion offer
UBS is offering to buy Credit Suisse for as much as US$1 billion, a deal that the troubled Swiss firm is pushing back on with backing from its biggest shareholder, Saudi National Bank.
Credit Suisse, which ended last Friday (Mar 17) with a market value of about 7.4 billion francs (S$10.8 billion), believes the offer is too low and would hurt shareholders and employees who have deferred stock, according to people with knowledge of the matter.
The UBS offer was communicated on Sunday with a price of 0.25 francs a share to be paid in stock. UBS also insisted on a material adverse change that voids the deal if its credit default spreads jump by 100 basis points or more, the Financial Times reported. Credit Suisse closed down 8 per cent to 1.86 francs at the close on Friday.
Swiss authorities are examining imposing losses on Credit Suisse bondholders as part of a rescue of the bank, two sources with knowledge of the matter said on Sunday. However, European regulators are apprehensive about such a move for fear that it could hit investor confidence elsewhere in Europe’s financial sector, the sources said, speaking on the condition of anonymity.
A final decision, however, had not been taken and the terms could still change, according to the sources. Losses on bondholders could need to be larger if Credit Suisse were wound down rather than if it were taken over by UBS, one of the sources said.
Swiss officials are weighing changes to the law to avoid the need for shareholder votes on the deal, some of the people said. They are also considering a full or partial nationalisation of Credit Suisse as the only other viable option outside a takeover by UBS Group, Bloomberg reported on Sunday. Switzerland is considering either taking over the bank in full or holding a significant equity stake if UBS is unable to complete a takeover of Credit Suisse, the report added.
If government money was put directly into Credit Suisse, Swiss officials would likely require the bail-in of debt and holders of additional tier 1 notes to potentially bear losses, one of the people involved in the discussions said. Credit Suisse had about 15 billion francs of AT1 securities and 49 billion francs of bail-in debt instruments at the end of 2022.
Swiss authorities are seeking to broker a deal that would address a rout in Credit Suisse that sent shock waves across the global financial system over the past week when panicked investors dumped its shares and bonds following the collapse of several smaller US lenders. A liquidity backstop by the Swiss central bank briefly arrested the declines, but the market drama carries the risk that clients or counterparties would continue fleeing, with potential ramifications for the broader industry.
The complex discussions over what would be the first combination of two global systemically important banks since the financial crisis have seen Swiss and US authorities weigh in, according to people with knowledge of the matter. Talks accelerated on Saturday, with all sides pushing for a solution that can be executed quickly after a week that saw clients pull money and counterparties step back from some dealings with Credit Suisse. BLOOMBERG, REUTERS
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