A group of Credit Suisse Group AG bondholders in Asia challenged Switzerland’s banking regulator over the decision to write down about 16 billion Swiss francs ($18.1 billion) of the bank’s riskiest debt, the first known move by wealthy investors in the region.
(Bloomberg) — A group of Credit Suisse Group AG bondholders in Asia challenged Switzerland’s banking regulator over the decision to write down about 16 billion Swiss francs ($18.1 billion) of the bank’s riskiest debt, the first known move by wealthy investors in the region.
The filing was made in the Swiss courts Wednesday, said Mahesh Rai at Singapore-based Drew & Napier LLC. Rai is acting for more than 60 investors across Asia for the case. He declined to specify the losses involved.
The move appeals Finma’s decision to prioritize shareholders over the additional tier-one bondholders, he said. The investors are seeking to “revoke the Finma order to write off the bonds,” and also for the claimants to be awarded compensation, said Rai who is working with colleague Benedict Teo on the case.
Finma declined to comment. It has previously published its position on the writedown, explaining that it was part of a takeover plan that was the least bad option after Finma and the government rejected a resolution of Credit Suisse or temporary nationalization.
Read more: Call Them CoCos or AT1s, Here’s Why They Can Blow Up: QuickTake
Bondholders in Asia are joining more than a thousand others in Europe and the US in seeking damages from the Swiss authorities.
Law firm Pallas Partners, which filed a suit last month, is seeking full compensation for its clients — 90 institutional investors and asset managers with $1.35 billion in so-called additional tier-1 bonds, as well as 700 retail and family office clients accounting for some $300 million. US law firm Quinn Emanuel also filed a claim in Swiss court representing more than 400 institutional investors who held about $4.5 billion worth of AT1s. Besides these, at least two other complaints have been filed.
Read more: Credit Suisse AT1 Bondholders Sue Over Lost $1.7 Billion (2)
Created after the 2008 financial crisis, AT1s are the lowest rung of bank debt, producing juicy returns in good times but taking the first hit when a bank runs into trouble. Shareholders — often the first domino to fall in such situations — salvaged some value from the takeover engineered by Swiss authorities, while Credit Suisse’s AT1 holders walked away with nothing. Many bondholders were furious at the move. European regulators hurried to reassure investors that the Swiss arrangement was an exception.
Separately there are about 100 investors from Singapore to the Philippines who have expressed interest to Drew & Napier in commencing a treaty claim against the Swiss government in relation to the loss from the Credit Suisse AT1 notes, Rai said. The treaty claim has not yet been filed, he said.
A spokesperson for Switzerland’s Federal Department of Finance declined to comment on any potential lawsuits.
“Investors who have suffered losses are free to take legal action, which is their right. Switzerland is a constitutional state,” the spokesperson said.
(Corrects name of Quinn Emanuel in sixth paragraph)
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