Credit Suisse AT1 holders in Asia add to claims over wipeout

A group of Credit Suisse Group AG bondholders in Asia challenged Switzerland’s banking regulator over the decision to write down about CHF16 billion ($23.9 billion) of the bank’s riskiest debt, the first known move by wealthy investors in the region.

The filing was made in the Swiss courts on May 3, said Mahesh Rai at Singapore-based law firm Drew & Napier. Rai is acting for more than 60 investors across Asia for the case. He declined to specify the losses involved, but added that the move appeals to Finma’s decision to prioritise shareholders over the additional tier-one bondholders. The investors are seeking to “revoke the Finma order to write off the bonds” and also for the claimants to be awarded compensation, said Rai, who is working with colleague Benedict

Teo on the case.

Finma declined to comment. It has previously published its position on the write-down, explaining that it was part of a takeover plan that was the least bad option after Finma and the government rejected a resolution of Credit Suisse or temporary nationalisation.

Bondholders in Asia are joining more than a thousand others in Europe and the US in seeking damages from the Swiss authorities. Law firm Pallas Partners filed a suit last month and is seeking full compensation for its clients — 90 institutional investors and asset managers with US$1.35 billion ($1.79 billion) in so-called additional tier-1 bonds and 700 retail and family office clients accounting for some US$300 million.

US law firm Quinn Emmanuel also filed a claim in a Swiss court representing more than 400 institutional investors who held about US$4.5 billion worth of AT1s. Besides these, at least two other complaints have been filed.

Created after the 2008 financial crisis, AT1s are the lowest rung of bank debt, producing juicy returns in good times but taking the first hit when a bank runs into trouble. Shareholders salvaged some value from the takeover engineered by Swiss authorities, while Credit Suisse’s AT1 holders walked away with nothing. Many bondholders were furious at the move. European regulators hurried to reassure investors that the Swiss arrangement was an exception.

Separately, about 100 investors from Singapore to the Philippines have expressed interest to Drew & Napier in commencing a treaty claim against the Swiss government about the loss from the Credit Suisse AT1 notes, Rai said. The treaty claim has not yet been filed, he added.

A spokesperson for Switzerland’s Federal Department of Finance declined to comment on potential lawsuits. “Investors who have suffered losses are free to take legal action, which is their right. Switzerland is a constitutional state,” the spokesperson said. — Bloomberg