Credit Suisse bondholders sue Swiss regulator over wipe-out
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[April 21, 2023] By
Kirstin Ridley, Jahnavi Nidumolu and John Revill
LONDON (Reuters) -Investors representing more than 4.5 billion Swiss
francs ($5 billion) of Credit Suisse bonds have sued the Swiss regulator
after their investments were wiped out during last month's
government-orchestrated rescue.
Law firm Quinn Emanuel Urquhart & Sullivan, which is representing the
bondholders, said on Friday the move was the first step in a battle to
seek redress for clients whose assets it said had been expropriated
during Credit Suisse's takeover by bigger rival UBS.
It is the first major lawsuit in the public domain over the Swiss
decision to render around $18 billion of Credit Suisse's Additional Tier
1 (AT1) debt worthless during the 3 billion Swiss franc all-share rescue
deal last month, which stunned markets and alerted litigators.
"We are committed to rectifying this decision, which is not only in the
interests of our clients but will also strengthen Switzerland's position
as a key jurisdiction in the global financial system," said Thomas
Werlen, Quinn Emanuel's Swiss managing partner.
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Swiss regulator FINMA (Financial Market Supervisory Authority), which
made the write-down order during weekend crisis talks in March after a
slump in the value of shares and bonds intensified fears about a global
banking crisis, declined to comment. Credit Suisse also declined to
comment.
Peter Viktor Kunz, a professor of business law at the University of
Bern, said it would be a disaster for FINMA and Switzerland's reputation
as a financial centre if the regulator lost the case.
"The reputation of the country as a stable place for investors is on the
line," he said.
The case was filed on April 18 in the Federal Administrative Court in St
Gallen, north east Switzerland.
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![](../images/042123PIX/busine22.jpg)
The logo of Swiss bank Credit Suisse is
seen in front of a branch office in Bern, Switzerland November 29,
2022. REUTERS/Arnd Wiegmann
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'VIABILITY EVENT'
FINMA said last month that its decision to impose steep losses on
some bondholders was legally watertight because the bond
prospectuses and emergency government legislation allowed for a
total write-down in a "viability event".
Engineered in the wake of the global financial crisis, AT1 bonds
were designed to ensure investors, not taxpayers, carry the burden
of risk if a bank runs into trouble.
Bondholders have been seeking legal advice since the rescue upended
a long-established practice of prioritising bondholders over
shareholders in a debt recovery, and a number of claims have already
been filed in Switzerland over the terms of the deal.
The Federal Administrative Court said it was still receiving
complaints, but declined to name claimants or comment on how many
had been lodged by bondholders or their lawyers.
Some investors have been trading the notes at penny prices in a
so-called litigation play, betting that successful legal claims will
boost values in the future, lawyers have said.
($1 = 0.8941 Swiss francs)
(Additional reporting by Jyoti Narayan in Begaluru; Editing by Savio
D'Souza, Alexander Smith and Jan Harvey)
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