Who Says AT1 Bondholders Didn’t Read the Manual?: Chris Hughes

Critics say the bond prospectus states a wipe-out was a risk. True. But investors may still be able to argue the warning wasn’t so clear.

The AT1 holders are livid because shareholders in Credit Suisse will receive UBS stock worth 3 billion francs (at the time the bid was made on March 19) in the bank’s rescue. The established convention in finance is that equity holders bear losses before bondholders. While the AT1 prospectus says this hierarchy may not apply to the notes in certain scenarios, the question is whether those circumstances prevailed in this case.

An emergency law was rushed through ...