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Claimants represent $5 billion of AT1 bonds
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Law firm says seeking redress for expropriation
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Claim one of a number filed in Switzerland over deal
(Adds comment, details)
By Kirstin Ridley, Jahnavi Nidumolu and John Revill
LONDON, April 21 (Reuters) - Investors representing more
than 4.5 billion Swiss francs ($5 billion) of Credit Suisse bonds have sued the Swiss regulator after their
investments were wiped out during last month's
government-orchestrated rescue.
Law firm Quinn Emanuel Urquhart & Sullivan, which is
representing the bondholders, said on Friday the move was the
first step in a battle to seek redress for clients whose assets
it said had been expropriated during Credit Suisse's takeover by
bigger rival UBS .
It is the first major lawsuit in the public domain over the
Swiss decision to render around $18 billion of Credit Suisse's
Additional Tier 1 (AT1) debt worthless during the 3 billion
Swiss franc all-share rescue deal last month, which stunned
markets and alerted litigators.
"We are committed to rectifying this decision, which is not
only in the interests of our clients but will also strengthen
Switzerland's position as a key jurisdiction in the global
financial system," said Thomas Werlen, Quinn Emanuel's Swiss
managing partner.
Swiss regulator FINMA (Financial Market Supervisory
Authority), which made the write-down order during weekend
crisis talks in March after a slump in the value of shares and
bonds intensified fears about a global banking crisis, declined
to comment. Credit Suisse also declined to comment.
Peter Viktor Kunz, a professor of business law at the
University of Bern, said it would be a disaster for FINMA and
Switzerland's reputation as a financial centre if the regulator
lost the case.
"The reputation of the country as a stable place for
investors is on the line," he said.
The case was filed on April 18 in the Federal Administrative
Court in St Gallen, north east Switzerland.
'VIABILITY EVENT'
FINMA said last month that its decision to impose steep
losses on some bondholders was legally watertight because the
bond prospectuses and emergency government legislation allowed
for a total write-down in a "viability event".
Engineered in the wake of the global financial crisis, AT1
bonds were designed to ensure investors, not taxpayers, carry
the burden of risk if a bank runs into trouble.
Bondholders have been seeking legal advice since the rescue
upended a long-established practice of prioritising bondholders
over shareholders in a debt recovery, and a number of claims
have already been filed in Switzerland over the terms of the
deal.
The Federal Administrative Court said it was still receiving
complaints, but declined to name claimants or comment on how
many had been lodged by bondholders or their lawyers.
Some investors have been trading the notes at penny prices
in a so-called litigation play, betting that successful legal
claims will boost values in the future, lawyers have said.
($1 = 0.8941 Swiss francs)
(Additional reporting by Jyoti Narayan in Begaluru; Editing by
Savio D'Souza, Alexander Smith and Jan Harvey)
