UBS raises US$3 billion from sale of Additional Tier 1 bonds

[LONDON] UBS Group sold US$3 billion of Additional Tier 1 (AT1) bonds on Monday (Jan 5) as major banks face modest refinancing needs that are expected to limit supply.

The bonds attracted more than US$21 billion of investor bids, according to sources familiar with the matter, allowing the bank to tighten pricing even as Swiss capital rules remain in flux and the fate of Credit Suisse’s wiped-out AT1s is unresolved.

The lender sold a pair of US$1.5 billion perpetual notes. The bonds, callable in 2031 and 2036, will respectively yield 6.625 and 7 per cent, about a half-percentage point tighter than initial price talk, the sources said.

Representatives at UBS declined to comment.

The sale marks UBS’s first AT1 transaction since September, according to data compiled by Bloomberg.

Since then, Switzerland’s Federal Administrative Court has revoked a 2023 order to write down about US$17 billion of Credit Suisse AT1 notes as part of its takeover by UBS. The court has yet to decide whether the writedown itself will ultimately be reversed, while banking regulator Finma has said it will challenge the ruling.

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Senior Swiss lawmakers last month put forward recommendations that would allow UBS to use AT1 bonds instead of equity as capital backing for its foreign units, a move that could ease the impact of tougher capital requirements under consideration.

Potential changes in Swiss capital requirements and the Credit Suisse bonds are among uncertainties that “are unlikely to be resolved soon and could continue to be a drag on UBS’s AT1 spreads,” CreditSights head of financials Simon Adamson wrote in a note to clients on Monday. BLOOMBERG