UBS Group mentioned on Wednesday it could purchase again 2.75 billion euros ($2.96 billion) value of debt it offered simply days in the past in a bid to spice up confidence amongst bondholders rattled by its $3 billion rescue of rival Credit score Suisse.
The bonds had been offered on March 9 and their repurchase by UBS highlights the lender’s efforts to shore up sentiment since its government-backed rescue of Credit score Suisse on Sunday.
UBS is shopping for again the bonds on the worth at which they had been offered reasonably than at market costs, compensating traders after a sell-off this week.
“They’re making an attempt to be pleasant to traders who bought simply earlier than the mess,” mentioned Jerome Legras, head of analysis at Axiom Different Investments.
UBS in a press release mentioned it was shopping for again a 1.5 billion-euro 4.625% fixed-rate observe due March 2028 and a 1.25 billion-euro 4.750% mounted fee observe due March 2032.
The notes are loss-absorbing senior unsecured bail-in notes.
Credit standing company S&P revised its outlook on the holding firm of UBS, the issuer of the bonds, to damaging from secure on Monday, reflecting strain on creditworthiness linked to the Credit score Suisse deal. S&P maintained its secure outlook on the working firm.
UBS shares and bonds have seesawed this week as traders assess the affect of the Credit score Suisse deal.
On Monday the shares fell by as a lot as 17% solely to shut 35% greater than these lows on Tuesday.
UBS bonds additionally tumbled, with Further Tier 1 (AT1 debt), a distinct type of bail-in debt, taking a giant hit particularly on Monday after Credit score Suisse’s AT1s had been written right down to zero as a part of its rescue.
Credit score Suisse AT1 bondholders received nothing, which the financial institution’s AT1 prospectus spelled out may occur in Switzerland, however markets had been nonetheless shocked, getting used to seeing bondholders rank greater than fairness holders who’re to obtain the worth of the share provide.
The costs of the bonds UBS is shopping for again on Wednesday had additionally tumbled however partially recovered on Tuesday.
They rallied additional following Wednesday’s announcement. The value of the March 2032 bond was up just below some extent on the day as costs on each bonds rose close to to the degrees UBS is providing to pay bondholders, Tradeweb information confirmed.
“The issuer has determined to launch this train on account of a prudent evaluation of those latest developments and the issuer’s long-term dedication to its credit score traders,” UBS mentioned in its assertion.
The buyback was “honest” given the market volatility for the reason that bonds had been offered, a banker concerned with the sale of the bonds mentioned, talking on situation of anonymity.
UBS shares had been final down 2.3% at 18.97 Swiss francs ($21.05), having risen as a lot as 3.6%.
Supply: Reuters
