UBS to raise CHF 6 billion of new capital through mandatory convertible notes, fully placed with Swiss Confederation

The Swiss National Bank (SNB) and UBS have reached an agreement to transfer up to USD 60 billion of currently illiquid securities and other assets from UBS’s balance sheet to a separate fund entity.rnrnWith this transaction, UBS caps future potential losses from these assets, secures their long-term funding, reduces its risk-weighted assets, and materially de-risks and reduces its balance sheet.rnrnThis transaction allows the SNB and shareholders of UBS to participate in the recovery potential of the entity’s assets once the loan is fully repaid.rnrnThe solution significantly reduces the uncertainty for UBS shareholders and clients and contributes to the stability of the financial system by ensuring an orderly sale of these assets. rnrnThe fund will be capitalized with up to USD 6 billion of equity capital provided by UBS and a non-recourse loan in the maximum amount of USD 54 billion provided to the fund by the SNB. The entity will be controlled by the SNB. UBS will sell its equity interests to SNB for USD 1 and will have an option to repurchase the equity once the loan is fully repaid for a purchase price of USD 1 billion plus half of the equity value exceeding USD 1 billion.rnrnTo fund its equity contribution, and at the same time maintain its strong capital position, UBS can raise CHF 6 billion of new capital in the form of mandatory convertible notes (MCN). The MCN has been fully placed with the Swiss Confederation.rn