UBS sets stage for equity conversion of $5b AT1 debt

UBS, the Swiss banking giant, announced on Monday that nearly $5 billion worth of Additional Tier 1 (AT1) bonds are now available for equity conversion, according to Reuters.
This decision, made by the bank’s shareholders last month, comes into effect as of May 10. It encompasses four outstanding AT1 issuances since November 2023, three of which total $4.5 billion, and another valued at 650 million Singapore dollars ($480 million).
As a result of this decision, these financial instruments are now subject to equity conversion upon the occurrence of a trigger or viability event and are no longer subject to write-down, as stated by UBS.
This move follows a crisis in the bank’s debt market last year, when Swiss regulator FINMA wrote down about $17 billion of Credit Suisse’s AT1s as part of its rescue operation.
In a sale in November, the first since its takeover of Credit Suisse, UBS witnessed strong demand as it made the bond terms more attractive, including a promise of conversion into shares in case of financial distress.
AT1 bonds, known for their role as a financial shock absorber if a bank’s capital levels fall below a certain threshold, have been promoted by regulators since the 2008–09 global financial crisis. This latest development marks a significant shift in UBS’s financial strategy.