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Pimco weighs joining investors suing over Credit Suisse AT1 bond wipeout

LONDON – One of the world’s biggest asset managers is considering joining hundreds of investors in challenging the Swiss regulator’s decision to wipe out about US$17 billion (S$23 billion) of Credit Suisse bonds following the bank’s takeover by UBS.

Pacific Investment Management Company (Pimco), which filed a suit against Swiss financial regulator Finma to meet an early May deadline for such submissions, has not yet joined any of the bond holder groups, according to a person familiar with the situation.

The firm is weighing whether to potentially pursue legal action to recoup some of its US$800 million of Credit Suisse’s so-called Additional Tier 1 (AT1) 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.

Bond holders have argued that the write-down was an unfair and disproportionate move that put shareholders before bond holders. Defenders of Finma’s decision point out that the risk of a write-down was laid out in the bond documents.

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

They include bond holders in Singapore, with at least 100 investors joining a class action earlier in May to recover about $100 million in losses. This comes on top of other smaller groups of investors in Singapore also seeking redress over the wipeout of their AT1 bonds.

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

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