London, 2 May 2023 — Pallas Partners LLP (“Pallas”) is coordinating proceedings that were issued on behalf of two large groups of Credit Suisse AT1 holders in Switzerland, executed as part of a broader litigation strategy and in response to the wrongful write-down of AT1s to enable UBS’s takeover of Credit Suisse. The effect of the purported write down was to flip the capital structure, and wipe out the AT1 bondholders in full.
Pallas has filed against the Swiss regulator FINMA and argues that the emergency ordinances issued by FINMA on 19 March should be considered invalid and the AT1 notes must be re-stated. The Swiss administrative courts will now consider the arguments that FINMA ordered the arbitrary violation of the property rights of the AT1 holders, in breach of Swiss constitutional and other legal protections. Further actions will follow. Pallas and Swiss counsel are building a multi-jurisdictional litigation strategy to seek to recover value for the AT1 holders, including public and private law claims in Switzerland.
The vast majority of the bondholders Pallas represents were holders of AT1s at the time of the write-down. The first group comprises over 90 global institutional investors and asset managers, which account for over US$1.35 billion in nominal value of AT1s. The second group of 460 retail and family office clients account for over US$160mn. Both groups remain open to other qualifying investors and continue to grow.
“We are working with a significant number of AT1 investors to execute a multi-jurisdictional litigation strategy to secure compensation and redress for our clients. The purported write down of the AT1s was unlawful, and our clients must be fully compensated,” said Natasha Harrison, Founder and Managing Partner of Pallas Partners LLP. “FINMA didn’t have the authority to issue the order to write-down the bonds; this was an abuse of process and the resolution procedure should not be used by Switzerland to enable UBS to take over Credit Suisse to the detriment of AT1 holders.”
Acting Swiss counsel are leading public and constitutional law experts Prof. Tomas Poledna and Prof. Urs Saxer with respect to FINMA, whilst leading Swiss disputes firm LALIVE is advising on contractual and capital markets law with respect to possible actions against Credit Suisse and UBS.
Following a best-in-class approach, Pallas assembled a team of lawyers with an extraordinary depth of experience in litigating matters relating to bank resolutions and wind-downs, government interventions and AT1/CoCo redemptions and cancellations.
Pallas’ lawyers have acted on most of the major banking and investor challenges since 2008 where banks have tried to flip the order of priorities, in Iceland, Ireland, UK, Cyprus, Greece, Spain, Portugal, Austria and Ukraine, and have represented holders of CoCo bonds in challenging cancellations and early redemptions, through to the UK Supreme Court. Pallas has an extensive practice acting for special situations and distressed holders in designing and implementing litigation strategies to recover value and create leverage.
Pallas is familiar with the extensive litigation already launched against Credit Suisse and is currently representing lenders to Mozambican SPVs in the “tuna bond” litigation against Credit Suisse before the English Courts. The firm also represents Greensill investors with respect to claims against Credit Suisse.
The LALIVE team is renowned for its expertise in complex banking litigation involving multiple plaintiffs and is currently handling some of the largest, most complex litigations in Switzerland. Current assignments include various high-profile cases exceeding US$6 billion in value (excluding the AT1 matter). The firm represents a significant number of Greensill investors in Swiss proceedings.
The litigation comes after US$17 billion of AT1s were written down to zero on the orders of FINMA, to allow UBS to takeover Credit Suisse, meaning the bank stayed under Swiss ownership, on 19 March 2023. Meanwhile, shareholders who should have ranked below bondholders received US$3.25 billion in compensation.