Pacific Investment Management Co and Invesco Ltd are among the largest holders of Credit Suisse Group AG’s so-called Additional Tier 1 (AT1) bonds that have been wiped out after the bank’s takeover by UBS Group AG.
Newport Beach, California-based asset manager Pimco is the largest holder of the Swiss lender’s AT1 bonds with about US$807 million of the securities — the riskiest in the bank’s debt stack — a person familiar with the matter who was not authorized to speak publicly said.
The US firm lost about US$340 million on its holdings, Reuters reported, citing an unidentified person.
Photo: Reuters
Because of the extraordinary government support, the takeover is set to trigger a complete write-down of 16 billion Swiss francs (US$17.3 billion) of the bank’s AT1 bonds to increase core capital.
Pimco also holds almost US$3 billion of Credit Suisse senior bank bonds, some of which had risen by about US$0.25 on the euro on Monday compared with Friday’s levels, the person said.
That might have offset some of the losses from its exposure to AT1.
Elsewhere, Invesco holds about US$370 million of Credit Suisse’s AT1 debt, data compiled by Bloomberg showed.
Blackrock Inc’s AT1 exposure at the end of last month was about US$113 million, the data showed.
Blackrock has reduced some of its holdings in the past few weeks, a person familiar with the matter said.
AT1 bonds are a legacy of the 2008 global financial crisis and are the lowest-ranked bank debt, offering attractive returns in good times, but taking the first hit when a bank runs into trouble. They were created to ensure that losses in times of crises would be borne by investors.
However, some holders of the bank’s AT1 bonds are preparing to push back on the regulator’s decision to write off the debt.
Traders at Goldman Sachs Group Inc are preparing to take bids on claims against Credit Suisse that could see investors recover some value, potentially through litigation, people with knowledge of the matter have said.
Meanwhile, AT1 bonds issued by banks in the Asia-Pacific region rebounded yesterday, with shares also rising, as reassurances by regulators helped restore some confidence in the risky debt after a market rout.
Thirty-seven of the 38 AT1 dollar bonds to trade as of 12:49pm in Hong Kong gained, with Westpac Banking Corp’s perpetual notes rising by a record, prices compiled by Bloomberg showed.
HSBC Holdings PLC and AIA Group Ltd climbed more than 3 percent in Hong Kong trading.
The 10-day volatility measure on financial stocks in the region reached its highest since March last year.
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