Asia investors charges Switzerland to court

Investors in Asia have joined a series of international lawsuits against the Swiss government over its handling of the takeover of Credit Suisse. The move came after Swiss authorities forced Credit Suisse to merge with larger rival UBS in March, which made $17bn of bonds held by investors worthless. The bonds, known as AT1 bonds, or contingent convertibles, are considered among the riskiest bonds issued by banks. In dire circumstances, the debt can be written down to zero, which is what happened when UBS took over Credit Suisse.

Dozens of individual bondholders in Singapore have joined thousands of aggrieved retail investors globally, who are challenging the Swiss authorities in court. Their main grievance is the manner in which the merger was conducted. The terms of the bonds show that bondholders are supposed to be compensated first, but in practice, shareholders were allowed to exchange their Credit Suisse shares for UBS shares, while bondholders got nothing. Lawyers say they have been inundated with enquiries from investors.

The legal firm representing bondholders has called the Swiss regulator’s decision “an unlawful action” that has had “devastating consequences on thousands of retail and small investors globally.” Another Asia-based bondholder who spoke to the BBC said he and his wife had their life savings wiped out by the decision. Investors are also unhappy with reassurances they received from Credit Suisse, despite the fact that the bank was going through enormous difficulties.

Credit Suisse says it is not commenting on the lawsuits. Legal experts have privately expressed doubts over whether the investors will be successful. But given that Swiss law only allows for a limited period in which claims can be submitted, bondholders say it is now or never. “People are hurting together and maybe the power of the collective can have an effect,” said one bondholder. “Who knows? If there’s some kind of settlement high up between the big boys, then the retail investors like us can get the drip feed of whatever trickles down.”