UBS Gets Help From Swiss Government To Cover CS Takeover Related Losses

UBS Group AG UBS inked a loss protection agreement with the Swiss government, effective post-completion of the acquisition of Credit Suisse Group AG CS.

As already stated, the acquisition is expected to close as early as June 12, 2023.

As per the deal, UBS will handle potential losses of the first CHF 5 billion, and if the amount exceeds, the Swiss government will cover losses of the next CHF 9 billion related to the emergency takeover. 

Related: UBS Cites $17B Hit From Rushed Credit Suisse Takeover, Blames Hasty Due Diligence

Also, UBS will pay the Swiss government a guarantee fee. This comprises an initial set-up fee of CHF 40 million, an annual maintenance cost of 0.4% of CHF 9 billion (CHF 36 million per annum) to cover the advisory costs and an annual drawn portion fee (risk premium) of between 0% and 4% of CHF 9 billion, depending on realized and expected losses. 

The contract will be in effect until all assets are realized that are covered under the guarantee or until UBS terminates it.

The agreement covers a specific portfolio of CS (3% of the combined assets), which includes loans, derivatives, legacy assets and structured products from Non-Core Unit.

To be eligible for payments by the government, UBS is obliged to keep its headquarters in Switzerland and manage non-core assets properly to reduce losses and maximize realized value.

Price Action: UBS shares closed lower by 0.05% at $20.25 on Thursday.