The US law firm Quinn Emanuel Urquhart & Sullivan has filed two lawsuits against the write-off of the value of Credit Suisse's AT1 bonds in Switzerland. One of the partners now sets out his arguments in an interview.
Thomas Werlen (pictured below) is a managing partner at US law firm Quinn Emanuel Urquhart & Sullivan in Switzerland. The lawyers have filed two lawsuits with the Federal Administrative Court on behalf of more than a thousand plaintiffs against the decision of the Swiss Financial Market Supervisory Authority Finma to write off Credit Suisse's AT1 bonds in full.
Werlen tenders three arguments. The measure was not proportionate, unsuitable to improving Credit Suisse's situation while violating good faith, Werlen tells «Finanz und Wirtschaft» (in German, behind paywall) in an interview.
(Image: Quinn Emanuel Urquhart & Sullivan)
«The write-down didn't provide Credit Suisse with one centime of liquidity, so the measure was not appropriate, And the bank didn't have a capital problem, we've been told, making it unnecessary.»
Disproportionate Write-Off
Declaring the bonds worthlessness was therefore inappropriate. In the takeover of Credit Suisse by UBS on March 19 effected based on emergency law, the Swiss financial regulator Finma instructed Credit Suisse to fully write off around 16 billion francs of AT1 bonds to zero. «Our clients together have invested about 5.5 billion francs, so they represent about one-third of the AT1 bonds,» Werlen says.
While it is true the terms of the bonds stated that the creditor hierarchy of bondholders before shareholders could be changed, those conditions were not met and the step was ultimately disproportionate and tantamount to expropriation. But even there a right to compensation existed Werlen argues.
The financial market supervisory authority violated the principle of good faith, and Werlen demands Finma's ruling be lifted.
«That would be the easiest way to resolve the matter without taxpayers' money,» he said.
