Was UBS Buying Credit Suisse Just ‘Soft Nationalization’?
The Breakdown
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Credit Suisse's AT1 was in the form of cocoa or contingent convertible bonds. The conditions of general cocoa's is that they would either get written down or converted to equity once a certain trigger is hit, usually an amount of total capital. In the process of writing down assets, CS fell below the key thresholds for tier one capital and this triggered a write down in AT1 assets. Since the company was taken over though, equity holders received a payment in UBS shares in return for relinquishing control to UBS. This was probably to satisfy the Saudis who received a non-trivial recovery on their recent investment.
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