(Bloomberg) -- At least two investors whose additional tier 1 holdings were wiped out by Credit Suisse Group AG's historic writedown have put in orders for UBS Group AG's latest offering of the same type of security.
The sale was one of the market's most highly anticipated, and got more than $36 billion of bids, roughly 10 times what UBS is raising. Relatively high yields - along with a planned tweak in the documentation offering further protections to creditors — proved too enticing to pass up, despite the losses in March, according to the two investors. They declined to be identified because they aren't authorized to speak publicly about the matter.
“The structural changes have made these bonds more creditor friendly,” said Suvi Platerink Kosonen, a banking analyst at ING.
As part of a Swiss-government brokered deal, Credit Suisse wiped out about $17 billion worth of AT1 bonds, causing uproar among holders because equity investors managed to retain some value. It also sparked a number of lawsuits against the Swiss financial market authority, also known as Finma, which are still ongoing.
UBS is raising $3.5 billion from a two-tranche deal. The one callable in five years launched at 9.25%. And the longer tranche — callable in 10 years — is also set to price at 9.25%, according to a person familiar with the matter. Both tightened by at least 75 basis points during the marketing phase. UBS's existing dollar AT1s offer an average yield of about 9.7% until their next call dates, according to data compiled by Bloomberg.
In addition to the yields, the notes contain a mechanism that would allow the bonds to be converted into ordinary shares once the bank's articles of association are amended to provide enough conversion capital. Such a move would cushion potential investor losses.
--With assistance from Neil Callanan.
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