UBS To Repurchase Outstanding Bonds To Meet Tighter Capital Rules

Tom Burroughes

2 December 2013

today said it is making a cash tender offer for a mix of bonds denominated in different currencies for a maximum aggregate principal amount of €1.75 billion ($238.1 billion), or around SFr2.15 billion, as the bank looks to cut balance sheet exposure and meet new global capital standards.

The Zurich-listed bank said the subordinated bonds subject to this offer count as tier 2 capital under the BIS Basel III phase-in rules currently in effect, but are not eligible as tier 2 capital when the Basel III capital rules, which impose new requirements on banks, are applied in full.

“This transaction is consistent with our proactive approach to reducing our balance sheet and future interest expense while maintaining our strong liquidity, funding and capital position,” UBS said in a statement.

The transaction is likely to cut the bank’s total Basel III phase-in total capital ratio by between 0.2 per cent and 0.5 per cent, it said.

“We expect to incur a small loss on this transaction, which we expect to recover in the short-term through the reduction in future interest expense,” the bank said.

The tender offer period will end on 13 December 2013, unless extended, re-opened or earlier terminated as provided in the tender offer memorandum, UBS added.