A second major group of Credit Suisse alternative tier 1 (AT1) bondholders is suing the Swiss financial markets regulator, known as Finma, over its decision to write down $17bn-worth of AT1 bonds as part of UBS’s forced takeover of the Swiss bank.
Law firm Pallas Partners said today it is working on litigation, filed in the Swiss courts last month, on behalf of two large groups of Credit Suisse AT1 bondholders that account for roughly $1.65bn in nominal value of AT1s.
“Finma didn’t have the authority to issue the order to write down the bonds. This was an abuse of process and the resolution procedure should not be used by Switzerland to enable UBS to take over Credit Suisse to the detriment of AT1 holders,” Natasha Harrison, founder and managing partner at the firm, said in a statement.
“The purported write down of the AT1s was unlawful, and our clients must be fully compensated,” she added.
According to standards set in the wake of the 2008 financial crisis, holders of AT1 bonds – also known as contingent convertibles, or CoCos – rank above equity holders in the creditor hierarchy.
But Finma contends that the AT1 bonds had a provision in the contracts allowing them to be written off in a ‘viability event’, in particular if government support was provided.
In response to the latest claim, Finma pointed City A.M. to a previous statement defending its decision.
The claim follows a similar case led by law firm Quinn Emanuel, which is representing investors that held some $4.5bn of wiped-out Credit Suisse bonds.
The firm previously acted on behalf of Banco Popular bondholders after it was acquired by Santander in a deal that also saw AT1 and AT2 bonds written down to zero.