Investors are increasingly looking to recover value from Credit Suisse (SIX:CSGN)'s additional tier 1 (AT1) debt, which lost its worth during the UBS Group AG (SIX:UBSG)'s takeover. The stakes have escalated as these investors seek a settlement with Swiss authorities over the contested decision to nullify Credit Suisse's risky AT1 bonds.
Cantor Fitzgerald's trading desk has been reportedly driving an offer to buy some of these claims for 9.5 cents per dollar, up significantly from the 3 to 4 cents in mid-August. This suggests that some money managers are betting on a potential settlement. The investors involved in these AT1 claims are aiming for a settlement of approximately 15 cents, according to a participant in one of the lawsuits.
Despite the increasing interest, there is no assurance that a resolution will be reached soon. However, AT1 bondholders argue that they were treated unfairly since traditionally, equity holders bear the brunt of losses, not bondholders. AT1s are notably risky debt instruments, created in the aftermath of the 2008 financial crisis to prevent taxpayers from bearing the cost of bank bailouts.
Market analysts have proposed that UBS's potential sale of its own AT1s could put pressure on Swiss regulators to address grievances surrounding the Credit Suisse AT1 claims.
The document shared by traders at Cantor is known as a bond run in financial circles. Typically issued by brokers on behalf of clients to potential sellers, it serves as a way to gauge pricing. Goldman Sachs Group Inc (NYSE:GS). established the trading mechanism for these claims in Credit Suisse AT1s, enabling investors to speculate on the outcome.
Cantor Fitzgerald and UBS have yet to respond to requests for comment.
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