UBS announces equity conversion provision for almost US$5 billion in AT1 debt

UBS on Monday (May 13) said almost US$5 billion worth of Additional Tier one (AT1) bonds, a form of debt, have been made available for equity conversion following a decision by shareholders of the Swiss bank last month.

The bank said that as of May 10, the decision covers four outstanding AT1 issuances made since November 2023, three worth a total of US$4.5 billion and one more with a value of S$650 million.

“As a result, as from such date, these instruments are subject to equity conversion (and no longer subject to write-down) upon the occurrence of a trigger event or a viability event,” UBS said in a statement.

Last year, Swiss regulator Finma sparked a crisis in the banks debt market when it wrote down about US$17 billion of Credit Suisse’ AT1s as part of its rescue.

In a sale in November, the first since its takeover of Credit Suisse, UBS saw strong demand as it made the terms of the bonds more appealing, including promising a conversion into shares in case of trouble.

AT1 bonds, which act as a shock absorber if a bank’s capital levels fall below a certain threshold, have been encouraged by regulators since the 2008-09 global financial crisis. REUTERS