The End of Credit Suisse!

Patrick Boyle On Finance

Patrick Boyle

Investing, Business

4.9 • 320 Ratings

🗓️ 22 March 2023

⏱️ 24 minutes

🔗️ Recording | iTunes | RSS

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Summary

Send us a textAfter a weekend of intense negotiations, Swiss authorities brokered an emergency deal to sell Credit Suisse the troubled 167-year-old investment bank to its Swiss rival, UBS. A $54bil lifeline from the Swiss National Bank last week failed to stem the crisis facing Credit Suisse following Silicon Valley Bank’s collapse: its share price collapsed and the flight of deposits accelerated. The deal has prevented a globally important bank from failing. Under the terms of the deal,...

Transcript

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0:00.0	Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.
0:27.2	Over the weekend, we saw the sale of Credit Suisse to UBS in probably the most dramatic moment
0:34.3	in global banking since the financial crisis of 2007, 2008.
0:40.7	As I discussed in my most recent podcast, Credit Suisse has been the problem child of European
0:47.7	banking for quite some time now, plagued by scandals, losses, management shakeups and restructuring plans.
0:56.7	They've been involved in every scandal of the last decade, always managing to lose money.
1:03.4	The bank was sold for $3.2 billion in an all-stock deal, meaning that shareholders
1:10.3	were paid in shares of UBS rather than in cash.
1:14.8	This represents a huge discount to the firm's prior market value.
1:19.9	The Swiss government additionally guaranteed just under $10 billion of the joint entity's losses
1:26.6	that it may suffer on certain portfolios of assets.
1:32.3	Controversially, the Swiss regulator FINMA demanded that $17.3 billion of Credit Suisse's
1:40.3	additional Tier 1 or 81 bonds be written off, meaning that these debt holders did
1:47.6	worse than stockholders, which has surprised quite a few investors. My podcast from last
1:54.4	week wrapped up by saying that a sale to UBS was a distinct possibility and that was exactly what ended up happening.
2:04.2	So today let's discuss the events that occurred over the weekend focusing in on the different
2:10.6	treatment of equity investors and AT1 bondholders whose wipeout is one of the more controversial elements of the deal.
2:20.1	We'll also look at who the largest holders of these bonds were and what they have to say about
2:26.2	the deal.
2:27.6	So backing up a bit, the important piece of news that was not out there last week was that on
2:33.9	Wednesday the Swiss National Bank,
2:36.2	the Swiss regulator FINMA and the Swiss Minister of Finance called the Senior Management
	...

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