8 ms·

It is very strange that the bondholders are wiped out, while the shareholders get 2 billion. The bondholders should have a superior claim to any recovery to the

It is very strange that the bondholders are wiped out, while the shareholders get 2 billion. The bondholders should have a superior claim to any recovery to the shareholders. It is true that the shareholders are getting only 10% of the share price they had a mere week ago and much less of the price years ago, but still they are getting something. This question was asked at the end of the press conference, the answer (in english translation) sounded like garbled nonsense.

rr808 4y ago
Yeah it doesn't sound right, its not as if the company went bankrupt or was shut down.
kgwgk 4y ago
> It is very strange that the bondholders are wiped out They are not. The holders of some particular kind of bond designed to be wiped out when some capital thresholds are triggered are wiped out. (It may be debatable if what happened here was or not a trigger event though.)
- blitzar 4y ago
  designed to be converted to common stock when some capital thresholds are triggered
  - kgwgk 4y ago
    That’s not what the term sheets said.
    - deleted 4y ago
      [deleted]
    - blitzar 4y ago
      The terms Senior Unsecured Debt with optional convertibility at the discreetion of the Swiss Resolution Authority. https://www.credit-suisse.com/about-us/en/investor-relations/financial-regulatory-disclosures/regulatory-disclosures/bail-in-debt-instruments.html https://www.credit-suisse.com/about-us/en/investor-relations...
      - kgwgk 4y ago
        Write-down feature: Yes (I mean, it’s true that they would be converted to equity in some scenarios when capital levels are triggered - my comment was misleading - but it’s also true that they are wiped out in other scenarios and it’s the FINMA’s call in this case.)
        blitzar 4y ago
        FINMA’s also claimed that CS still had 14% capital (double the trigger lever) on Thursday - 20bn of capital seems to have vanished on Friday.
        kgwgk 4y ago
        https://www.bloomberg.com/opinion/articles/2023-03-20/ubs-got-credit-suisse-for-almost-nothing https://www.bloomberg.com/opinion/articles/2023-03-20/ubs-go... "In UBS’s deal to buy Credit Suisse, shareholders are getting something (about CHF 3 billion worth of Credit Suisse shares) and Credit Suisse’s AT1 holders are getting nothing: The Credit Suisse AT1 securities are getting zeroed. This is not, to be clear, exactly because Credit Suisse’s CET1 capital fell below 7%; instead, there is a separate clause of the AT1s allowing them to be zeroed if the bank’s regulator decides that zeroing them is “an essential requirement to prevent CSG from becoming insolvent, bankrupt or unable to pay a material part of its debts as they fall due.” Plus, in a situation like this, the banking regulators get to do a certain amount of ad hoc stuff, and they do. (They got rid of the shareholder vote on the deal!) Zeroing the AT1s while preserving a little value for the common does seem to have been done in an ad hoc way; my point is just that it follows very logically from the terms and function of the AT1s."
        blitzar 4y ago
        All very true, however, if they still had 14% CET1 capital ... they didnt need a bail out, or to be sold etc. If however, they required a bail out ... then they cant have had that much capital left. It is not compatible to be bankrupt, but have 40bn of capital, while also only being worth 2bn - one of the statements has to be false.

rr808 4y ago

Yeah it doesn't sound right, its not as if the company went bankrupt or was shut down.

kgwgk 4y ago

> It is very strange that the bondholders are wiped out They are not. The holders of some particular kind of bond designed to be wiped out when some capital thresholds are triggered are wiped out. (It may be debatable if what happened here was or not a trigger event though.)

blitzar 4y ago
designed to be converted to common stock when some capital thresholds are triggered
- kgwgk 4y ago
  That’s not what the term sheets said.
  - deleted 4y ago
    [deleted]
  - blitzar 4y ago
    The terms Senior Unsecured Debt with optional convertibility at the discreetion of the Swiss Resolution Authority. https://www.credit-suisse.com/about-us/en/investor-relations/financial-regulatory-disclosures/regulatory-disclosures/bail-in-debt-instruments.html https://www.credit-suisse.com/about-us/en/investor-relations...
    - kgwgk 4y ago
      Write-down feature: Yes (I mean, it’s true that they would be converted to equity in some scenarios when capital levels are triggered - my comment was misleading - but it’s also true that they are wiped out in other scenarios and it’s the FINMA’s call in this case.)
      - blitzar 4y ago
        FINMA’s also claimed that CS still had 14% capital (double the trigger lever) on Thursday - 20bn of capital seems to have vanished on Friday.
        kgwgk 4y ago
        https://www.bloomberg.com/opinion/articles/2023-03-20/ubs-got-credit-suisse-for-almost-nothing https://www.bloomberg.com/opinion/articles/2023-03-20/ubs-go... "In UBS’s deal to buy Credit Suisse, shareholders are getting something (about CHF 3 billion worth of Credit Suisse shares) and Credit Suisse’s AT1 holders are getting nothing: The Credit Suisse AT1 securities are getting zeroed. This is not, to be clear, exactly because Credit Suisse’s CET1 capital fell below 7%; instead, there is a separate clause of the AT1s allowing them to be zeroed if the bank’s regulator decides that zeroing them is “an essential requirement to prevent CSG from becoming insolvent, bankrupt or unable to pay a material part of its debts as they fall due.” Plus, in a situation like this, the banking regulators get to do a certain amount of ad hoc stuff, and they do. (They got rid of the shareholder vote on the deal!) Zeroing the AT1s while preserving a little value for the common does seem to have been done in an ad hoc way; my point is just that it follows very logically from the terms and function of the AT1s."
        blitzar 4y ago
        All very true, however, if they still had 14% CET1 capital ... they didnt need a bail out, or to be sold etc. If however, they required a bail out ... then they cant have had that much capital left. It is not compatible to be bankrupt, but have 40bn of capital, while also only being worth 2bn - one of the statements has to be false.