UBS buys back nearly $3 billion bonds issued days ago

[March 22, 2023]  By Yoruk Bahceli and Akriti Sharma

(Reuters) -UBS Group said on Wednesday it would buy back 2.75 billion euros ($2.96 billion) worth of debt it sold just days ago, seeking to boost confidence among investors rattled by its $3 billion rescue of rival Credit Suisse at the weekend.

The bonds in question are senior unsecured bail-in notes that were sold on March 9: a 1.5 billion-euro 4.625% fixed-rate note due March 2028 and a 1.25 billion-euro 4.750% fixed rate note due March 2032, UBS said in a statement.

Since its government-backed rescue of Credit Suisse at the weekend, UBS has seen the value of its shares and bonds gyrate wildly.

UBS shares fell by as much as 17% after markets opened on Monday, only to close 35% higher than those lows the following day.

The yield on its 7% additional tier dollar (AT1) bond jumped to a record 29.8% at one point on Tuesday, from below 10% just a week ago, according to Tradeweb data.

On Wednesday it was at around 18%.

AT1s are a different form of bail-in debt that sent shockwaves through markets this week when Credit Suisse's AT1s were written down to zero as part of its rescue, meaning those bondholders got nothing while equity holders at least got the value of the share offer.

The prices of the bonds UBS is buying back on Wednesday had also tumbled.

"The issuer has decided to launch this exercise as a result of a prudent assessment of these recent developments and the issuer's long-term commitment to its credit investors," UBS said in the announcement of the buyback.

A logo of the Swiss bank UBS is seen on the Paradeplatz in Zurich, Switzerland March 21, 2023. REUTERS/Denis Balibouse/File Photo

UBS is buying the bonds at the price at which they were sold rather than at market prices, which compensates investors after the sell-off earlier this week.

"I would say this is almost funny as (the bonds) were issued so recently, but generally speaking it makes sense," said Jerome Legras, head of research at Axiom Alternative Investments.

"They're trying to be friendly to investors who purchased just before the mess."

The bonds UBS is buying back rallied further following Wednesday's buyback announcement, Tradeweb data showed.

UBS shares were last down 0.3% at 19.35 Swiss francs ($21.05), having risen by as much as 3.6% in early trading.

($1 = 0.9285 euros)

($1 = 0.9224 Swiss francs)

(Reporting by Akriti Sharma in Bengaluru and Yoruk Bahceli in Amsterdam; writing by Amanda Cooper; editing by Mark Potter and Jason Neely)

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