*report in update
Details about purchasing the Swiss credit for the UBSone of the most important deals in the global banking sector in recent years, began to become clear this Sunday, in a race by the Swiss government and the two banks to find a solution to the Credit crisis before the opening of markets in Asia. The merger of the two businesses creates a wealth management company with US$ 5 billion invested.
The value was higher than previously predicted. The first news reported that UBS would pay US$ 1 billion for Credit. The value became US$ 2 billion in the following news, but at the press conference the final announced value was 3 billion Swiss francs (something around US$ 3.2 billion)
The purchase was defined by the minister of the Swiss Federal Council, Karin Keller-Sutter, as a commercial solution. “It’s not a bailout, it’s a trade deal,” she said.
Swiss National Bank (SNB) will provide substantial liquidity assistance to support the acquisition. “It’s a guarantee to allow liquidity,” said Keller-Sutter, highlighting the protection of the Swiss economy “in an exceptional situation.”
Both banks have unrestricted access to existing SNB facilities through which they can obtain liquidity. In addition, and based on the Emergency Ordinance of the Federal Council, Credit Suisse and UBS can obtain a liquidity assistance loan with senior creditor status in bankruptcy in the total amount of up to CHF 100 billion.
What will be the structure of the combination between UBS and Credit Suisse?
According to the chairman of the boards of the two banks, with the combination of the two companies, the CEO of the new company will be the current CEO of UBS, Ralph Hamers. The deal also creates a wealth management company with US$ 5 billion invested, but many things will be adjusted.
At the press conference, representatives of the two banks said that UBS will have to cut $8 billion by 2027, which will include jobs.
In addition, around 16 billion Swiss francs ($17.3 billion) worth of Credit Suisse bonds lost value following the company’s acquisition by UBS. “In close coordination with FINMA, the Swiss Confederation and the SNB, UBS will take full control of Credit Suisse,” the Swiss regulator said in a statement on Sunday.
“The extraordinary government support will trigger a total reduction in the face value of all AT1 shares of Credit Suisse worth around CHF 16 billion and therefore an increase in principal capital.”
*With information from Bloomberg
