UBS mulls first AT1 bonds sale since Credit Suisse takeover - reports

investmentweek.co.uk:

Some investors are still sceptical after losing billions of dollars during the Credit Suisse bailout.

Following the release of the bank's quarterly results last month, UBS executives have gone on a roadshow for investors, where they proposed changes to the terms of future AT1 bond issuances to make them more agreeable to bondholders, sources told theFT. 

According to the newspaper, UBS is under pressure to replace up to $17bn of Credit Suisse AT1 bonds in the coming years in a bid to increase the efficiency of the enlarged bank's capital structure and free up cash for shareholder payouts and possible acquisitions. 

What are AT1 bonds and why is Credit Suisse's $17bn wipe-out controversial?

However, some investors are still skeptical after losing billions of dollars during the Credit Suisse bailout, when a Swiss emergency rule allowed the country's financial regulator, FINMA, to protect shareholders at the expense of AT1 holders.

The AT1 bonds were issued by Credit Suisse as part of its capital structure to meet regulatory capital requirements. These had a clause allowing Swiss authorities to write them off regardless of what happened to the shares if the bank fell insolvent. 

Through a number of lawsuits, bondholders are contesting the legitimacy of FINMA's decision to pass through last-minute legislation to write down the bonds, which they say upended the established hierarchy given unsecured bondholders traditionally rank above equity holders in the capital structure.

Two people with knowledge of the discussions told the FT that one alternative under consideration is swapping out UBS's AT1 bonds, which are intended to be written down in the event the bank runs into difficulties, with versions of the product that