NEW YORK — Some holders of Credit Suisse AT1 bonds wiped out by the bank’s planned merger with UBS have instructed law firm Quinn Emanuel Urquhart & Sullivan to represent them for discussions with Swiss authorities and possible litigation to recover losses.
The bondholder group holds a “significant percentage of the total notional value” of the AT1 bonds, the law firm said in a statement on Monday. The group includes large institutions that invested in the bonds long before the merger, it said.
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“There is still a chance that the various actors will recognize and correct the mistakes made in hastily orchestrating this merger,” said Thomas Werlen, managing partner at Quinn Emanuel’s Zurich office.
AT1 bonds are the riskiest type of debt banks can issue, ranking immediately after equity in the event of losses.
That hierarchy was overturned by Swiss regulators who wiped out $17 billion of Credit Suisse’s AT1 debt under its takeover by UBS last month, a merger aimed at avoiding a meltdown in the country’s financial system.
Banks’ AT1 bonds fell after the Swiss decision highlighted the risks of investing in these securities. European regulators tried to stop the market rout by saying the owners of this type of debt would only suffer losses after shareholders have been wiped out – unlike what happened at Credit Suisse.
Meanwhile, Switzerland’s Federal Prosecutor has opened an investigation into the state-backed takeover of Credit Suisse by UBS Group, the office of the attorney general said on Sunday.
The prosecutor is looking into potential breaches of the country’s criminal law by government officials, regulators and executives at the two banks. (Reporting by Davide Barbuscia; Editing by Chizu Nomiyama and Conor Humphries)
