Credit Suisse bondholders prepare lawsuit after contentious $17 billion writedown

cnbc.com:

In this article

A number ofCredit Suisse bondholders said Tuesday that they were considering legal action after $17 billion of the bank's additional tier-one (AT1) bonds were wiped out as part of its emergency sale to UBS.

Swiss regulator FINMA announced Sunday that the AT1s, widely regarded as relatively risky investments, will be written down to zero, while stock investors will receive payouts as part of the takeover, angering bondholders.

David Benamou, chief investment officer at Axiom Alternative Investments and a holder of Credit Suisse AT1 bonds, told CNBC on Tuesday that he would be joining the lawsuit along with, he imagined, «probably most bondholders.»

California-based law firm Quinn Emanuel Urquhart & Sullivan said Monday that it had put together a «multi-jurisdictional team of lawyers from Switzerland, the U.S. and the U.K.» following the rescue deal.

«That team are already in discussions with a number of holders of Credit Suisse's AT1 capital instruments, representing a significant percentage of the total notional value of AT1 instruments issued by Credit Suisse, about the possible legal actions that may be available to them in light of the announcement of the merger between UBS and Credit Suisse,» the firm said.

The firm previously represented bondholders following Spanish bank Banco Popular's sale to Banco Santander for 1 euro in 2017, which also saw AT1s written down to zero.

The firm said it was planning to convene a call for bondholders on Wednesday to talk through «potential avenues of redress.»

Ordinarily in the event of a bank failure, AT1s — also known as contingent convertibles or «CoCos» — would be prioritized above equity holders.

The bonds were created after the Global Financial Crisis as a