Under the deal, holders of Credit Suisse AT1 bonds will get nothing, while shareholders, who usually rank below bondholders in terms of who gets paid when a bank or company collapses, will receive $3.23 billion.on Monday as the treatment of Credit Suisse AT1 bondholders highlighted the risks of investing in this type of debt.
They make up part of the capital cushion that regulators require banks to hold to provide support in times of market turmoil.If AT1s are converted into equity, this supports a bank's balance sheet and helps it to stay afloat. They also pave the way for a "bail-in", or a way for banks to transfer risks to investors and away from taxpayers if they get into trouble.AT1s rank higher than shares in the capital structure of a bank.
In Switzerland, the bonds' terms state, however, that in a restructuring, the financial watchdog is under no obligation to adhere to the traditional capital structure, which is how bondholders lost out in the Credit Suisse situation. Credit Suisse AT1 holders, therefore, are the only ones not to receive any kind of compensation. Under the rescue deal, they rank lower than shareholders in the bank, who can at least get UBS' takeover price of 0.76 Swiss francs per share.
No one cares about rich people problems. Banks failing is there problem
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