UBS buys US$18.6b worth of stressed securities
Sunday, August 10, 2008
SWISS bank UBS AG agreed on Friday to buy back US$18.6 billion of debt securities whose value collapsed during the global financial crisis and to pay US$150 million to settle charges it misled investors.
The settlement, the largest in a nationwide probe into whether banks sold bonds that were riskier than advertised, followed a day after Citigroup Inc and Merrill Lynch & Co Inc announced they would buy back almost US$20 billion of the so-called auction-rate securities between them.
UBS and other banks had marketed the securities as safe and liquid as cash, but those who bought them have been unable to access their money since the US$330 billion market collapsed in February, freezing the assets, as the credit crunch worsened.
Signalling a possible deepening in the legal fallout, the Bank of New York Mellon Corp said one of its units was under investigation by US regulators over the securities.
Other institutions were also under investigation, North American Securities Administrators Association President Karen Tyler said. She urged banks to "step up and do the right thing for their investors".
UBS will purchase US$8.3 billion of the securities from clients beginning on Oct 31 and all or any remaining US$10.3 billion held by institutional clients beginning in June 2010.
That is in addition to US$3.5 billion of tax-exempt auction preferred stock the bank said it would repurchase in July.
Including fines and write-downs of auction-rate debt it will redeem, the settlement will cost the Swiss bank US$900 million before taxes, which it will book in second-quarter earnings, UBS said in a statement.
Analysts estimated the write-downs would amount to as much as US$1.8 billion. Reuters
The settlement, the largest in a nationwide probe into whether banks sold bonds that were riskier than advertised, followed a day after Citigroup Inc and Merrill Lynch & Co Inc announced they would buy back almost US$20 billion of the so-called auction-rate securities between them.
UBS and other banks had marketed the securities as safe and liquid as cash, but those who bought them have been unable to access their money since the US$330 billion market collapsed in February, freezing the assets, as the credit crunch worsened.
Signalling a possible deepening in the legal fallout, the Bank of New York Mellon Corp said one of its units was under investigation by US regulators over the securities.
Other institutions were also under investigation, North American Securities Administrators Association President Karen Tyler said. She urged banks to "step up and do the right thing for their investors".
UBS will purchase US$8.3 billion of the securities from clients beginning on Oct 31 and all or any remaining US$10.3 billion held by institutional clients beginning in June 2010.
That is in addition to US$3.5 billion of tax-exempt auction preferred stock the bank said it would repurchase in July.
Including fines and write-downs of auction-rate debt it will redeem, the settlement will cost the Swiss bank US$900 million before taxes, which it will book in second-quarter earnings, UBS said in a statement.
Analysts estimated the write-downs would amount to as much as US$1.8 billion. Reuters
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