Bondholders in Credit Suisse are considering legal action against the bank after their Additional Tier 1 capital instruments were wiped out as part of the bank's rescue by rival UBS.
Law firm Quinn Emanuel said it is in discussions with a number of holders of Credit Suisse’s AT1s "about the possible legal actions that may be available to them in light of the announcement of the merger between UBS and Credit Suisse".
There are SFr16bn (US$17.3bn) of these instruments outstanding by face value and Quinn Emanuel said these investors represented "a significant percentage" of the total.
A call for bondholders is likely to be convened on Wednesday, at which the firm's lawyers “will talk through the potential avenues of redress which bondholders should be considering”.
The firm acted for a group of junior bondholders of Banco Popular, which was resolved in 2017 and sold to Spanish rival Santander for €1. All the AT1 and Tier 2 instruments of that bank were effectively written down to zero as they were bailed in just before Santander’s purchase.
Despite years of action and various lawsuits, the Popular bondholders, led by Algebris, Anchorage Capital, Cairn Capital and Pimco, have so far failed to win any compensation. They had argued that the bank had not been correctly valued before its resolution.
Credit Suisse AT1 holders' complaint would be they were wiped out but equity holders have been left intact, reversing the conventional hierarchy of creditors' claims.
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