Market will resolve 'Yes' if the bank implodes or is liquidated/nationalized, 'No' if they survive, whether by receiving a government bailout/backstop or otherwise.
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1.00@MarkIngraham Failing does not mean that parts of the bank are not kept around. For example SVB still exists as a bank.
@xyz its up to the asker, you could argue pan am still exists as companies use its branding.
The bank will be broken up by private equity groups and parts of it will continue to function as something calling itself credit Suisse. It won't fail as a single piece like Lehman did. There are no big banks anymore that are able to make large deals so it will fall apart and parts of it will exist.
@xyz I also want to add credit Suisse USA Holdings, INC is a separate company and still exists and is fine.
@xyz the question could have been phrased like "can I still buy stock in CS under the ticker". In that case no. But after the parent dissolves the subsidiary will exist and still call itself the same name. It is whatever the asker decides.
UBS has agreed to buy Credit Suisse after increasing its offer to more than $2bn, with Swiss authorities poised to change the country’s laws to bypass a shareholder vote on the transaction as they rush to finalise a deal before Monday.
https://www.ft.com/content/ec4be743-052a-4381-a923-c2fbd7ea9cfd
Should resolve as NO once this processes.
@Gabrielle Arguably should resolve to YES? Shareholders and bondholders are being wiped out, UBS is being given $9 billion by the Swiss government to cover expected losses, and UBS has stated an intention to wind down the operations once it has control. "Credit Suisse" isn't surviving at all, it's being liquidated and will cease to exist, as per OP's definition.
https://www.dw.com/en/ubs-and-swiss-national-bank-agree-to-credit-suisse-takeover/a-65041855
@jack A forced merger to enable a rival to wind down the business is certainly not "surviving". This market's NO criteria requires that CS survive, but they aren't being bailed out, their bonds and stocks are in fact being wiped out, and once the process is complete, CS is going to stop existing. That's clearly a YES by the specified resolution criteria.
The link you cited says the shares will payout a positive amount. That should mean that bondholders are not wiped out - equity is wiped out first.
Definition of bankruptcy is:
Bankruptcy is a legal proceeding initiated when a person or business is unable to repay outstanding debts or obligations.
https://www.investopedia.com/terms/b/bankruptcy.asp
If they can pay back depositors and bondholders and there's some leftover for the shareholders, they weren't bankrupt.
@jack They can't pay back bondholders, though? CS bonds are going to zero.
Given that the base question here is whether or not CS has failed... it takes a strange reading to not see CS's current situation as a success, instead of as a failure.
Hmm, well, this all comes down to what definitions the question is using. My reading was based on
'No' if they survive, whether by receiving a government bailout/backstop or otherwise.
They are receiving a bailout/backstop from the UBS and the government combined. Dunno what survive means here - CS is clearly not surviving as in independent entitity, but as part of UBS.
@jack If bondholders are wiped out and CS stops existing as an independent entity, I think I will resolve this market ‘No’ per my definition of “survive.” It would be different if CS continue operations, maintained ownership over its assets, or was able to pay back its debts, but it looks like it’s unable to do so. The M&A by UBS seems to be facilitated by central banks to prevent contagion.
@EricG Seems like CS ordinary bonds are fine, only special AT1 bonds are being wiped out (AT1 bonds have a provision that allows them to be converted to equity capital)
https://www.nytimes.com/2023/03/19/business/credit-suisse-investors-hedge-funds.html - CS's ordinary bonds have risen sharply after the news (i.e. the markets expect them to pay out), it is only their AT1 bonds that were zeroed out.
The second trade that investors plowed into was in Credit Suisse’s roughly $17 billion of so-called AT1 bonds. This is a special type of debt issued by banks that can be converted to equity capital should they run into trouble. This made that debt inherently riskier to hold, because it carried the chance that bondholders could be wiped out.
It said that the AT1 bonds would be wiped out as part of the deal, to add roughly $16 billion of equity to support UBS’s takeover.
That raised eyebrows among some investors because it upended the normal order in which holders of different assets of a company expect to be paid in bankruptcy. Stock investors are at the bottom of that repayment list and usually lose all their money ahead of other investors.
However, in this instance, regulators chose to trigger the conversion of the AT1 bonds to equity capital to help the bank, while still offering Credit Suisse shareholders one UBS share for every 22.48 Credit Suisse shares held.
@EricG That's kind of a confusing post; you said that if CS stops existing, you'll resolve as NO (as if they survived)? And that you'd resolve differently (as YES) if they were doing better?
Also see the discussion in this thread - CS ordinary bonds were not wiped out. What was wiped out were AT1 bonds, which have an explicit provision that if the bank's equity capital ratio falls below 7%, then the AT1 is written down to zero. Notably, the threshold is 7%, not 0%. In addition, they have a provision
allowing them to be zeroed if the bank’s regulator decides that zeroing them is “an essential requirement to prevent CSG from becoming insolvent, bankrupt or unable to pay a material part of its debts as they fall due.”
this is to prevent CSG from becoming insolvent, bankrupt, or unable to pay its debts; they are still solvent and not bankrupt.
@Endovior Sorry for the confusion, I meant I’d resolve ‘Yes.’
There’s some uncertainty around the resolution criteria for this market, and that’s my fault. Let me clarify:
If UBS completes the CS buyout, CS will cease to exist as an independent entity.
In the absence of the government-mandated UBS buyout, it’s extremely doubtful that CS would have remained solvent even with the $54 billion lifeline extended by the Swiss central bank or with selling the AT1 bonds.
From the WSJ:
“Credit Suisse Chairman Axel Lehmann said the recent bank troubles that started in the U.S. were too much to withstand. “The acceleration of the loss of trust and the worsening of the last few days made it clear that Credit Suisse cannot continue to exist in its current form,” he said.”
Therefore, I will be resolving this market ‘YES’ if UBS completes the takeover.
@EricG cs could definitely become a zombie bank independent of ubs, it doesn't have to go through
@MarkIngraham Definitely a good point! I think 96% was probably an overcorrection, we’ll see how things pan out. The takeover will be a long process.
@Endovior CS will pay the bondholders that hold standard bonds. The one written to zero are special instrument called AT1, aka Perpetual Tier-1 Write-Down Credit Notes. They gives a better return and they have bigger risk https://www.credit-suisse.com/about-us/en/investor-relations/financial-regulatory-disclosures/regulatory-disclosures/capital-instruments.html
For the purposes of Credit Default Swaps, Credit Suisse's sale to UBS was not a bankruptcy event.
CDS Panel Rules Credit Suisse Takeover Not a Bankruptcy Event
A panel overseeing the credit-default swap market has ruled that the government-brokered takeover of Credit Suisse Group AG didn’t constitute a bankruptcy event in which an insurance payout could be triggered.
The Credit Derivatives Determinations Committee said the fire sale of Credit Suisse to UBS Group AG was not a bankruptcy credit event, according to a notice on its website. The question to the panel had related to both senior and subordinated Credit Suisse Group swaps.
Most people would agree that Credit Suisse failed in some sense. But to clear up the above discussion, it's worth noting that neither Credit Suisse's normal bonds (excluding AT1s which are a special thing) nor their stock were wiped out. The key thing that happened was they were forced to sell to UBS by Swiss regulators.
@jack like I said the criteria are garbage and will resolve NA, but I will bet you the pink sheets listing will remain until capitalism systemically collapses in 2026