Singapore's crisis-era investment in UBS lost the city-state more than $4 billion in less than ten years, according to a new report. The Swiss firm's investment bankers also fumbled the exit.
The Government of Singapore Investment Corporation, or GIC, is swallowing a loss of more than $4 billion (S$5.59 billion) after pulling the plug on its stake in UBS, specialty publication «IFR» (behind paywall) reported.
The GIC was introduced as a major shareholder in 2007, when the banks losses on illiquid mortgage securities began piling up. The city-state plowed 11 billion Swiss francs into mandatory convertible bonds in the Swiss bank, which became shares two years later. On Monday, the fund conceded that it is «disappointed» in the loss-making investment.
From Bad To Worse
While UBS was a natural fit for Singapore, given Swiss finance's close ties to the rival financial center, it was disastrous from the start.
UBS quickly needed several more injections of capital from shareholders and a government resuscitation one year after the GIC's infusion. It wasn't until 2011 that the bank began giving up on investment banking ambitions in favor of bolstering its capital and generating profits – and paying dividends – from its lucrative private banking business.
IFR's arrived at the $4 billion figure based on conservative estimates of income from share sales, interest payments on the convertibles, dividends, and the market value of 2.7 percent in the bank which the GIC is maintaining.
UBS Fumbles
IFR also reported that UBS investment bankers, the deal's sole bookrunner, wrapped up the sale of 93 million shares at for 1.5 billion Swiss francs – but not before an embarrassing glitch.
The bank accidentally communicated the sale before the Swiss stock market closed, and as UBS equity capital markets bankers were working the phones to potential investors.
Ultimately the sale was «covered» in just 20 minutes, according to the report, with half of the GIC's stake sold to the top 10 orders.
