UBS Offers To Buy Credit Suisse, Credit Suisse Wants More Money
Shareholders Don't Want To Face The Wipeout Coming Straight At Them
Credit Suisse is doing its level best to avoid facing the reality of their extinction. UBS is offering to buy them at $0.27 a share, which Credit Suisse thinks is too low.
They are ignoring that UBS is far from an enthusiastic suitor, and is prepared to void the deal if anything else happens.
The offer was communicated on Sunday morning with a price of SFr0.25 a share to be paid in UBS stock, far below Credit Suisse’s closing price of SFr1.86 on Friday, the people said. UBS has also insisted on a material adverse change that voids the deal if its credit default spreads jump by 100 basis points or more, they added.
Despite facing imminent collapse tomorrow, the Credit Suisse shareholders are holding out for more money.
Credit Suisse, which ended Friday with a market value of about 7.4 billion francs ($8 billion), believes the offer is too low and would hurt shareholders and employees who have deferred stock, according to people with knowledge of the matter.
If the deal falls through, the Swiss government may have to nationalize Credit Suisse and take it over directly.
Switzerland is looking at either taking over the bank in full or taking a significant equity stake if a deal between USB (UBS) and Credit Suisse (CS) can't be brokered, according to a Bloomberg report, which cited people familiar.
Anything can happen as the Swiss authorities are trying to find a solution for the situation by the time Asian markets open, which is late evening on Sunday in Europe, Bloomberg said.
No matter the outcome, the Swiss government is on the hook for billions of Credit Suisse losses. The outstanding question is who besides the Swiss taxpayers are going to get screwed with this deal.
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Update: looks like the UBS deal has made it over the finish line.
Remember after the dust settled from the Great Financial Crisis of 2008-09, and analysts were dissecting what happened and why? The consensus was that no, nothing had really been ‘fixed’ by all the quantitative easing and bailouts, but the problems had been just kicked down the road. Even worse, down the road the situation was going to be many times more dire, and the financial authorities would have far fewer and less effective tools to use.
There have been many recessions in my lifetime when it looked as though the financial house of cards was really going to collapse - but each time, astoundingly enough, there emerged creative mechanisms to forestall the reckoning. Have they really run out of financial mechanisms this time? If so, it’s Great Depression 2. If not, the mechanisms are likely to require a large group of major ‘losers’ - the taxpayers, the stockholders, the pension funds, etc. Who’s going to get walloped on the chin this time? I’ll bat there are some major players this weekend trying to throw each other under the bus...