Asian investors have joined international lawsuits against the Swiss government in connection with its actions to take over Credit Suisse bank.
In March, the Swiss authorities forced the troubled financial institution to agree to merge with a stronger competitor by that time, UBS. The country’s leadership feared that the bank, whose position was unstable, could collapse. This action caused the bonds of a financial institution owned by investors to fall in price by $17 billion.
One of the bondholders from Singapore reported that the collapse occurred with incredible speed. He was a client of a bank absorbed by a competitor for several years. In January, the investor purchased bonds worth about 500 thousand dollars, even though the financial institution at that time was already at the center of scandals and faced problems due to accusations of violating the law.
The bank assured the investor that all the claims were wrong, which is why he decided to buy bonds. According to him, all this time there was a feeling of gambling.
Companies are selling bonds to investors to raise funds, eventually paying the money back with a premium surcharge.
The Swiss financial regulator Finma declined to comment on the lawsuits, but in March issued a statement stating the fulfillment of contractual conditions for the write-off.
Dozens of individual bondholders in Singapore have joined thousands of affected retail investors around the world who are challenging the decision of the Swiss authorities in a lawsuit. The main claim concerns the specifics of the merger of financial institutions.
In the lawsuit, special attention is paid to how the issue of priorities was resolved in the bankruptcy of the bank. The terms of the bonds stipulate that, in the initial order, holders of equity debt securities should receive compensation, if there is an appropriate opportunity. The shareholders’ interest is defined as secondary.
In reality, it turned out that the shareholders were allowed to exchange their shares of Credit Suisse for shares of UBS at a significantly reduced cost. This means that the shareowners in the current situation were able to get something, and the bondholders were left with nothing.
A law firm representing the interests of bondholders described the Swiss regulator’s decision as illegal and have devastating consequences for thousands of investors around the world.
Epaminontas Triantafilou of the law firm Quinn Emanuel said that the bondholders were deprived of the value of their securities as a result of a series of administrative acts that violate the law.
Investors also express dissatisfaction with the fact that Credit Suisse gave them positive assurances against the background of serious difficulties, in which the possibility of fulfilling promises is on the verge of being feasible and unworkable.
Vinit Chandra, another bondholder in Singapore, says that the bank’s presentations stimulated buying of debt securities even on March 14, the day before Saudi investors announced their lack of intentions to provide financial assistance to Credit Suisse. After that, the share price of the financial institution fell by 25%.
Credit Suisse said it would not comment on the lawsuits. Legal experts, in the framework of private communication with media representatives, expressed doubts that investors would get the desired result during the trial.
As we have reported earlier, Credit Suisse Reveals Scale of Bank’s Bankruptcy.