Author: Helin Akbulut
Introduction
Swiss Financial Markets Supervisory Authority (“FINMA”), through its decision dated 19 March 2023, approved the merger of Credit Suisse with UBS Group AG (“UBS”) and to write down the Additional Tier 1 capital bonds (referred to as AT1) issued by Credit Suisse, with a total value of approximately CHF 17 billion (“FINMA Decision”). With the write down of Credit Suisse’s AT1 bonds, the receivable rights of bondholders lost their economic value. On the other hand, within the scope of the merger transaction, Credit Suisse shareholders were allocated approximately three billion Swiss francs. FINMA Decision and the situation of the shareholders led a large number of bondholders to bring lawsuits against such decision before the Swiss Federal Administrative Court (“Administrative Court”), and even liability proceedings before the New York courts).
In the legal proceedings initiated, bondholders appealed the FINMA Decision, on the grounds detailed below, and the discussions that started within this framework flourished debates on the position of the investor under capital markets law. Finally, the fact that the full text of the FINMA Decision was made available to all investors only in May 2023 opened a new window to the discussions in terms of the principle of transparency. In this Newsletter article, the claims of the plaintiffs in the annulment proceedings against the FINMA Decision and the principle of investor protection will be summarized under Turkish law. In addition, the hierarchy between shareholders and creditors in absorbing the risk of loss, being the hot topic after the FINMA Decision, will be discussed within the framework of the regulations in the European Union and Türkiye, and finally, the developments in May 2023 will be conveyed in the context of the principle of transparency.
Claims of Bondholder Investors Against FINMA Decision
FINMA explained the legal grounds for the write down of the AT1 bonds with its press release on 23 March 2023, following announcing that it had authorized the merger transaction and decided to write down the AT1 bonds on 19 March 2023.[2] In the statement, FINMA underlined the contractual clause under AT1 bond issuance terms as the legal basis for the write down, stating that the triggering event has occurred and the governmental aid was provided, which was both defined in the issuance documents.
