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Allianz’ PIMCO Weighs Joining Investors Suing Over Credit Suisse AT1 Bonds

By | May 26, 2023

Pacific Investment Management Co. is considering joining hundreds of investors in challenging the Swiss regulator’s decision to wipe out about $17 billion of Credit Suisse Group AG bonds following the bank’s takeover by UBS Group AG.

PIMCO, which filed a suit against Finma in order to meet an early May deadline for such submissions, has not yet joined any of the bondholder groups, according to a person familiar with the situation. (Editor’s note: PIMCO is a subsidiary of Allianz).

The firm is weighing whether to potentially pursue legal action to recoup some of its $800 million of Credit Suisse’s so-called Additional Tier 1 bonds, according to people familiar with the matter. Those bonds were written down to zero after the acquisition and the Newport Beach, California-based asset manager was among the largest holders of the bonds.

Credit Suisse Bondholders Who Lost $1.7B in UBS Deal File Lawsuits

PIMCO, which runs one of the world’s largest actively managed bond funds, also held almost $3 billion of Credit Suisse senior bank bonds before the acquisition, Bloomberg previously reported.

Bondholders have argued the writedown was an unfair and disproportionate move that put shareholders before bondholders. Defenders of Finma’s decision point out that the risk of a writedown was laid out in the bonds’ documents.

The Swiss Federal Administrative Court has said it has received around 230 appeals, involving roughly 2,500 claimants, against the March 19 writedown.

Law firm Pallas Partners, which filed a suit in April, is seeking full compensation for its clients, which as of early May included 90 institutional investors and asset managers with $1.35 billion in AT1 bonds, as well as 700 retail and family office clients accounting for some $300 million.

Quinn Emanuel Urquhart & Sullivan filed in April and has now amassed more than 1,000 clients, including institutional investors, that held around $6 billion in the bonds. Besides these, at least three other complaints have been filed.

Earlier this month, Credit Suisse withdrew an appeal over the writedown of its AT1 bonds. The bank had argued that the wipeout of the junior debt should not have applied to so-called contingent capital awards made to some bankers, because they were not issued by the lender itself “but awarded instead by other group companies to their respective employees.”

–With assistance from Allison McNeely.

Photograph: A PIMCO advertisement is displayed on a building in Hong Kong. Photo credit: Brent Lewin/Bloomberg

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Topics Lawsuits Allianz

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