In an effort to regain the confidence of investors shaken by its $3 billion bailout of rival Credit Suisse over the weekend, UBS Group announced on Wednesday that it will buy back 2.75 billion euros ($2.96 billion) in debt that it had just days earlier sold.
According to a statement from UBS, the bonds in question are two senior unsecured bail-in notes that were sold on March 9: a 1.5 billion euro note with a fixed rate of 4.625% due in March 2028 and a 1.25 billion euro note with a fixed rate of 4.750% due in March 2032.
Since Credit Suisse bailed thanks to the government and UBS’s help over the weekend, the value of UBS’s bonds and shares has fluctuated significantly.
After the markets opened on Monday, UBS shares dropped as much as 17%, but the next day they closed 35% higher than their lows.
According to Tradeweb statistics, the yield on its 7% extra tier dollar (AT1) bond increased to a record 29.8% at one point on Tuesday from below 10% just a week earlier.
It was about 18% on Wednesday.
Different from other bail-in debt, AT1s shocked markets last week. This happened when Credit Suisse’s AT1s reduced to zero as part of its rescue. As a result, those bondholders received nothing, whereas equity investors at least received the value of the share offer.
However, bonds that UBS will buy back on Wednesday saw a decline in price as well.
According to UBS, the issuer made the decision to begin the buyback after a careful evaluation of these recent events and the issuer’s long-term commitment to its credit investors.
In order to make up for the sell-off earlier this week, UBS will buy back the bonds at the selling price rather than the market price.
Following Wednesday’s buyback announcement, the bonds UBS is repurchasing rose even further, according to Tradeweb data.
UBS shares last traded at 19.35 Swiss francs ($21.05), down 0.3% from their early trading gains of up to 3.6%.
