UBS (UBS.US) announced accrued equity conversion provisions for nearly $5 billion AT1 bonds

Zhitongcaijing · 05/13 10:33

The Zhitong Finance App learned that UBS Group (UBS.US) said on Monday that according to the bank's shareholders' decision last month, AT1 (Additional Tier 1) bonds (a form of bond) worth nearly 5 billion US dollars can already be used for equity conversion. The bank said that as of May 10, the decision covered four outstanding AT1 bonds issued since November 2023, three with a total value of US$4.5 billion and another worth S$650 million (US$480 million).

UBS said in a statement: “Therefore, as of the above date, in the event of a triggering event or an event that jeopardizes the ability to continue operations, these bonds will be converted into equity (no write-off will be made).”

Last year, the Swiss Financial Market Supervisory Authority (FINMA) wrote down about $17 billion of AT1 bonds in the process of rescuing Credit Suisse, triggering a crisis in the bank bond market.

In November of last year, UBS sold bonds for the first time after acquiring Credit Suisse. Demand for these bonds is very strong due to their more attractive terms, including promises to be converted to stocks in case of trouble.

It is worth mentioning that since the 2008-09 global financial crisis, the issuance of AT1 bonds has been encouraged by regulators. When a bank's capital level falls below a certain threshold, such bonds can act as a shock absorber.