It’s been a tumultuous few weeks for Swiss lender Credit score Suisse—however one hedge fund has reportedly gained massive from the financial institution’s collapse and subsequent rescue.
Credit score Suisse was bought out by rival UBS earlier this month in a $3.25 billion deal backed by the Swiss authorities, with the financial institution agreeing to be taken over amid issues about its viability as a enterprise.
The historic rescue deal got here after a disaster in confidence led to greater than $100 million of belongings being pulled out of the financial institution within the ultimate three months of 2022, following years of scandals, management issues and authorized points.
Days earlier than the UBS takeover was introduced, Credit score Suisse said it will borrow as a lot as 50 billion Swiss francs ($54.5 billion) from Switzerland’s central financial institution and purchase again round $3 billion in debt at an inflated worth.
Bloomberg reported on Friday that New York-based Marathon Asset Administration had amassed round $150 million value of bonds in Credit score Suisse’s senior working firm (OpCo) days earlier than the financial institution made its provide to purchase again the debt, citing an nameless supply.
In accordance with the publication, Marathon had purchased the bonds at a lowered worth—and made round $30 million inside a couple of days because of its well-timed wager on the securities.
Representatives for Marathon didn’t reply to Fortune’s request for remark.
Massive wager on bonds
Marathon Asset Administration Chair and CEO Bruce Richards confirmed in an interview with Bloomberg tv final week that the hedge fund had certainly made a giant wager on Credit score Suisse bonds.
“We went out and purchased a really giant place in short-dated Credit score Suisse bonds … and people bonds had been then tendered for,” he mentioned. “We averted all of the longer-term debt and simply purchased the OpCo debt within the low 80 [cents] which can be value excessive 90s now, just some days later.”
Marathon, which makes a speciality of buying distressed debt, can also be among the many hedge funds scooping up Credit score Suisse’s AT1 bonds, which are actually buying and selling as claims, according to Bloomberg.
Holders of the dangerous AT1 notes—which act as buffers within the case of a financial institution’s liquidity ranges falling under a sure stage—were left furious when regulators made the controversial determination to jot down down $17.3 billion in Credit score Suisse AT1s in favor of preserving $3.3 billion in worth for shareholders as a part of the UBS takeover.
Usually, bondholders are prioritized over shareholders in terms of getting their capital again when a financial institution faces collapse. Nevertheless, in Switzerland, the monetary regulator will not be compelled to adjust to these conventions.
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