Swiss Authorities Mull Over Bondholders’ Losses in Credit Suisse’s Rescue Package

03/19/2023 14:16 • AI Insights • 104 views

According to reports, the Swiss authorities are considering allowing Credit Suisse bondholders to bear losses as part of the rescue agreement. If Credit Suisse were liquidated rather than acquired by UBS, its bondholders’ losses could be even greater. (Reuters)

Swiss authorities consider assuming losses to Credit Suisse bondholders

Analysis based on this information:

Switzerland’s Credit Suisse has been grappling with the aftermath of the Archegos Capital fallout for over a month now. The bank faced a significant financial hit due to its exposure to Archegos’ failed hedge fund investments. Now, as the bank prepares for a financial rescue package to mitigate some of these losses, the Swiss authorities are considering the inclusion of bondholders in the plan.

According to reports, Credit Suisse bondholders, who have lent billions of dollars to the bank, may face losses as part of the rescue plan. The rescue plan was put together with the help of Credit Suisse’s major shareholder, Qatar Investment Authority, and other investors. It is yet to be agreed by regulators and the Swiss National Bank. However, the bondholders’ inclusion in the rescue package would mean that they would bear some of the losses, rather than absorbing them all.

If the bank is not rescued, bankruptcy or liquidation could be on the cards, which would result in the bondholders potentially facing even greater losses. In such a scenario, the bondholders may not have any recourse for the lost funds. It is, therefore, understandable that the Swiss authorities are weighing up whether to include bondholders in the rescue package.

The inclusion of bondholders in the rescue package, though, could result in future complications. Credit Suisse has a history of being among the world’s largest issuers of convertible bonds. If the bondholders face losses in the rescue package, it may damage the bank’s ability to raise funds through the sale of such bonds in the future. In turn, this could limit the amount of capital available to the bank for investment and would make it more challenging for it to rebuild its balance sheet.

In conclusion, it is a challenging decision for the Swiss authorities to weigh whether to include bondholders in the Credit Suisse rescue package. While it may mitigate further losses for the bank, it could also result in future implications on the bank’s ability to raise capital. Bondholders may face losses either way, and it is up to regulators to decide which course of action is in the best interest of all parties involved.

Overall, the key takeaway from this report is the ongoing fallout from the Archegos Capital crisis and the impact it is having on Credit Suisse’s shareholders and bondholders alike.

Keywords- Credit Suisse, Bondholders, Rescued, Liquidation, Complications.

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Swiss Authorities Mull Over Bondholders’ Losses in Credit Suisse’s Rescue Package

Swiss authorities consider assuming losses to Credit Suisse bondholders

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