As UBS works to complete its takeover of Credit Suisse soon, more investors are rushing to court over the write-down of Credit Suisse's mandatory convertible bonds. The pressure is increasing, especially from the US.
In recent weeks, the Swiss Federal Administrative Court has received four lawsuits in connection with Credit Suisse's Additional Tier 1 (AT1) bonds.
More lawsuits are expected this week as UBS accelerates the closing of the transaction, with UBS chairman Colm Kelleher recently saying he wants the deal done before summer.
Further Lawsuits
According to a «Bloomberg» (behind paywall) report Tuesday, hundreds of investors holding mandatory convertible bonds worth around $1.7 billion are looking for their day in court. Meanwhile, investors representing more than a third of the AT1 bonds issued by Credit Suisse have opted to file suit, including major holders such as the Migros pension fund, according to the report.
Two US Firms Stand Out
Among the plaintiffs is the law firm Pallas Partners which filed a lawsuit with a Swiss court on April 18, arguing the Swiss Financial Market Supervisory Authority (Finma) had no right to order the write-down.
The law firm, which says it represents 90 institutional investors and asset managers with $1.35 billion in AT1 bonds and 700 private clients and family offices with about $300 million, is seeking full compensation for its clients.
The Fine Print
US law firm Quinn Emmanuel also filed a lawsuit in Switzerland, as finews.com also reported. In the case, the lawyers are representing more than 400 institutional investors holding AT1 bonds worth around $4.5 billion.
To write down the AT1 bonds, Finma relied on emergency laws that went into effect the weekend of March 18 and 19, when Credit Suisse was bailed out. Proponents of the write-down point out that the fine print of the terms of the bond always warned of the risk of a write-down to zero, as finews.com reported.
Disregarded Creditor Hierarchy?
The presumably injured bondholders consider a change in the law on the day before the bonds were written off to be unfair. They argue that a procedure overturning the creditor hierarchy, in which shareholders have priority over bondholders, is wrong.
