Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

UBS Contingent Capital Bonds Got $9 Billion Orders, CFO Says

Updated on

UBS AG, Switzerland’s biggest bank, received orders of $9 billion for the contingent capital bonds issued last week, or 4 ½ times the amount sold, Chief Financial Officer Tom Naratil said.

About 58 percent of the $2 billion in notes were placed with investors in the U.S., Naratil said in a phone interview today. Another third was sold in Europe, including Switzerland, and the rest in Asia, he said. Institutional investors such as asset managers took up about 70 percent, he said.

The 10-year securities, which carried a 7.625 percent coupon, will be written off if UBS’s common equity ratio falls below 5 percent or the bank faces a bailout.

Under Swiss rules, UBS and Credit Suisse Group AG need to hold contingent capital with a 5 percent trigger amounting to 6 percent of risk-weighted assets. That means UBS may need to raise a total of about 14.4 billion Swiss francs ($14.8 billion) in contingent capital if it cuts risk-weighted assets to the targeted 240 billion francs. Last week’s sale adds to $2 billion of such notes sold in February.

Last week’s sale was the first one offered to U.S. investors after the bank received indications of interest from institutional and wealth management clients there following the sale of the February contingent capital bond, Naratil said. “And we did see quite a strong demand from the U.S.,” he added.

The bank had meetings with investors in New York and Boston last week prior to the bond sale in addition to ones in Europe, he said.

Capital Ratios

“Investors in the U.S. were very quick to get up to speed,” Naratil said. “There weren’t very many questions. A lot of it I think had to do with comfort about our capital position more than anything else.”

UBS’s capital ratio for triggering the contingent capital bonds will be calculated under the prevailing regulatory rules. The company has to satisfy Basel 2.5 rules until the end of this year, and then adopt various Basel III changes as they are phased in. The bank’s core Tier 1 ratio under Basel 2.5 rules at the end of June was 17.2 percent, which was equivalent to a common equity ratio of 13.1 percent under phased-in Basel III rules.

The coupon on the bonds, which was higher than 7.25 percent on the February issue, reflected market conditions rather than the downgrade by Moody’s Investors Service of UBS’s credit rating in June, Naratil said. The rating company lowered UBS by two levels instead of the maximum three-level downgrade it had considered.

UBS will continue to sound out the market to decide whether to hold another contingent capital note sale later this year, Naratil said, adding that it’s “reasonable to expect” two to three such sales a year to get the bank to fulfill regulatory requirements ahead of schedule.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.