Credit Suisse's writedown of its AT1 bonds roiled financial markets around the world, and law firms are considering legal action. But a group of major US and Canadian asset managers has decided against that.
The Credit Roundtable, a lobby group of the largest American and Canadian fixed-income asset managers, will not take legal action against Credit Suisse related to its write-off of 16 billion Swiss francs ($17 billion) of AT1 bonds, according to a «Reuters» report citing a person familiar with the matter.
In connection with the forced takeover of Credit Suisse by UBS, the Swiss Financial Market Supervisory Authority (Finma) ordered the entire amount of Additional Tier 1 (AT1) debt be written down to zero. The unconventional step caused outrage among not only bondholders but the financial markets in general. Yesterday, Finma defended its position in ordering the write-off saying there was a contractual basis for doing so, with further support for the move coming from an emergency government measure, as finews.com reported.
The source seemed to agree with that assessment, saying it was always «black and white» that the bonds can be written down to zero should adverse events transpire. «So if you bought it and didn't know about it, shame on you, and if you bought it and knew about it, well ...,» the source added.
Creditor Protection
The lobby group discussed the issue at a meeting earlier in the week with some members seeking to sue the banks over the write-off, according to «Reuters.» In the end, the activist association decided against pursuing legal action. Still, that doesn't prevent individual members of the association from taking action, the source told the news outlet.
The Credit Roundtable, which was founded in 2007 to protect bondholders, has 43 members, including Pimco, Vanguard, MetLife, Canadian pension fund Omers, and Sun Life Financial.
