UBS sells US$3.25 billion in first deal since AT1 ruling

UBS Group sold its first bonds since a court decision raised questions about the Swiss lender’s possible exposure to previously cancelled Credit Suisse debt.

The bank priced US$3.25 billion of senior notes, according to a source familiar with the matter who asked not to be identified. The US$2 billion shorter-maturity tranche sold at 0.95 percentage point over Treasuries, while the US$1.25 billion longer-dated tranche had a spread of 0.875 percentage point, the source said. Both tranches priced about a quarter-point tighter than initial price talk. The bonds are expected to be rated A2/A-/A.

The offering marks UBS’s first return to the public debt market since the Swiss Federal Administrative Court ruled a decision by authorities in early 2023 to wipe out some 16.5 billion Swiss francs (S$27 billion) in Credit Suisse AT1s was unlawful. The decision was taken at the time to facilitate an emergency purchase of Credit Suisse by UBS.

UBS has said that it intends to appeal the ruling.

Additional Tier 1 bonds, or AT1s, are the riskiest type of debt banks can sell and are the first in line to take losses if a lender hits trouble.

Monday’s transaction comes as UBS has offered to repurchase a series of outstanding notes as part of a liability management exercise.

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Last week, the lender posted earnings that beat even the highest of analyst estimates compiled by Bloomberg. That’s even as the lender has also come under scrutiny over its exposure to bankrupt US auto parts supplier First Brands Group.

UBS chief executive officer Sergio Ermotti has defended the bank’s investment strategies after questions arose over the exposure. BLOOMBERG