Swiss investors set to launch legal challenge of Credit Suisse deal in pursuit of greater compensation
UBS’s takeover of Credit Suisse faces yet another legal challenge as an association of Swiss investors have announced their intention to file a lawsuit on behalf of former Credit Suisse shareholders.
The Swiss Association for the Protection of Investors said that after receiving a “large number of inquiries”, it has decided to coordinate a lawsuit.
“The aim is to obtain a cash compensation payment for Credit Suisse shareholders corresponding to the value between the share price set by the merger agreement and the share price determined by the court,” it said.
The deal, engineered by Swiss authorities in March to prevent a broader financial meltdown, is the largest banking merger since 2008.
In the takeover, Credit Suisse was valued at CHF3bn compared to a market valuation of around CHF7bn on the last trading day before the deal was announced.
The legal challenge joins the many existing cases which are challenging the decision of Finma, the Swiss regulator, to write down the value of Credit Suisse’s AT1 bonds to zero.
Elsewhere another legal challenge to the deal drew to a close after a committee responsible for reviewing disputes related to credit default swaps (CDS) confirmed that UBS is the sole successor to Credit Suisse.
A CDS is a financial derivative that allows an investor to swap or offset their credit risk. The price of a CDS rises when a firm is seen as less likely to pay back its debt.
The ruling means UBS will be considered as the new reference entity for the swaps, with the effective date being 12 June, when the deal was completed. Without a new credit event the contracts cannot be triggered.
The move, although widely expected, put the final nail in the coffin for any hopes of a payout for Credit Suisse CDS holders.
Previously the committee ruled that there had been neither a bankruptcy credit event nor a government intervention credit event, both of which would have triggered a payout.
Despite the complexities and costs associated with the deal, many analysts have pointed to the significant opportunities the deal poses for UBS, particularly in wealth management.
UBS declined to comment.