Litigation specialists Quinn Emanuel have been instructed by a group of Credit Suisse bondholders to represent them in discussions with Swiss authorities and to prepare for “possible litigation” to recover losses from the forced takeover of Credit Suisse by UBS.
Quinn Emanuel received a mandate from AT1 bondholders to represent them on Thursday last week, the law firm said in a statement today.
“We are extremely pleased to have been retained by a key AT1 bondholder group and now look forward to seeking compensation for our clients, drawing on our extensive experience in situations of this kind,” said Richard East, Quinn Emanuel’s senior partner in London.
The legal threat comes after the rescue of Credit Suisse by UBS, which led to $17bn worth of Credit Suisse AT1 bonds being wiped out while shareholders received some form of compensation.
According to standards set in the wake of the 2008 financial crisis, holders of AT1 bonds rank above equity holders in the creditor hierarchy.
The Swiss regulator contends that the AT1 bonds had a provision in the contract allowing them to be written off in a ‘viability event’, in particular if government support was provided.
Following the controversial decision, the European Central Bank and Bank of England rushed to issue soothing statements, reiterating the priority of AT1 bondholders over shareholders.
Quinn Emanuel has 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.
This time around Quinn Emanuel is advising a “diverse array of affected bondholders”, including “large institutions who invested in these instruments long before the merger was announced”.
Managing partner at Quinn Emanuel Thomas Werlen said: “There is still a chance that the various actors will recognize and correct the mistakes made in hastily orchestrating this merger.
“While we are certainly prepared to pursue whatever proceedings are necessary, a potential constructive engagement with the relevant stakeholders could prevent years of litigation,” he continued.
Credit Suisse is holding its AGM tomorrow. It is expecting shareholder revolts on a number of issues, including the re-election of its chair Axel Lehmann.