had one overriding objective – to maintain confidence in the global banking system.
But the total loss for hybrid holders, who have fared even worse than lower ranking equity holders, could have widespread ramifications in already skittish fixed income markets. And that, remarkably, is what has happened over the weekend. The decision to bail in the hybrid capital and write the value off to zero, wiped out a large claim on the bank’s assets, effectively boosting the combined capital position of the bank.
They will receive one share in UBS for every 22.48 they hold in Credit Suisse, so while it’s not a great outcome, they’ve done better than tier 1 capital providers which assumed they had priority claims on an asset. Precisely who these investors are is also a source of intrigue. It may be that Swiss and Asian private banking clients own these securities and may have done so with leverage.
Source: Loan Digest (loandigest.net)
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