Tue 03/21/2023 08:56 AM
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Law firm Pallas is forming a group of Credit Suisse AT1 holders to explore litigation options in Switzerland, England and the U.S. in the wake of the Swiss bank’s subordinated bonds being written down to zero in connection with the UBS merger, Pallas Managing Partner Natasha Harrison told Reorg.

The law firm with offices in New York and London is planning to host a call with investors on Wednesday, March 22 at a time that is yet to be determined. AT1 investors who wish to join should email CSAT1@pallasllp.com for details. Pallas said they expect more than 30 investors to join the call tomorrow.

Pallas is also currently representing lenders against Credit Suisse in the “tuna bond” litigation and in relation to Greensill. “We are currently in talks with multiple AT1 holders at present due to our deep-rooted expertise and understanding of state interventions into banks, CoCo bonds and Credit Suisse,” Harrison said.

Litigation firm Quinn Emanuel Urquhart & Sullivan is also in discussions with a “significant percentage” of investors holding Credit Suisse’s AT1 capital instruments about possible legal actions, as reported. Brown Rudnick is advising claims traders handling Credit Suisse’s bonds, a source close said.

Investors in Credit Suisse’s junior debt are considering litigation strategies after being wiped out by Finma, the Swiss financial market supervisory authority, as the regulator over the weekend forced UBS to take on Credit Suisse to stabilize financial markets.

Reorg’s analysis shows that Credit Suisse’s bonds do permit for AT1 capital to be written down ahead of equity in non-liquidation scenarios. Reorg reported on the risk of a Viability Event on March 16 and the bank communicated openly about the risk of write-downs on March 14, highlighting that a “trigger of regulatory capital instruments with point of non-viability conversion/write-down at FINMA’s discretion.”

Today, AT1 notes across Europe are up 5%-10% after tumbling around 20% Monday, March 20 on the back of Finma’s decision to wipe out Credit Suisse CHF 16 billion additional tier one instruments.

Deutsche Bank’s 4.5% perpetual AT1s and BNP’s 4.5% perpetual AT1s are indicated at 67-69, UniCredit’s 3.875% perpetual AT1s are at 63-65, Commerzbank’s 4.25% perpetuals are at 69-70, SEB’s 5.125% perpetuals are at 87-89 and Santander’s 3.625% perpetuals are at 62-64, according to a source. UBS’ shares are up 4.7% since markets opened today, while Credit Suisse’s equity increased marginally, up 0.34% on the day after a drop of almost 70% over the past month.

--Magnus Scherman, Luca Rossi
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