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UBS raised $3.5bn via a dual-trancher AT1 issuance, its first since Credit Suisse’s historic AT1 write-down. The deal was met with strong demand, receiving combined orders of more than $36bn, over 10x issue size.
– It raised $1.75bn via a PerpNC5 AT1 bond at a yield of 9.25%, a solid 75bp inside initial guidance of 10% area. If not called before the call date on 13 November 2028, the coupons will reset to the US 5Y Treasury plus 474.5bp then, and every five years thereafter. The table above compares the latest UBS 9.25% PerpNC5 against similar rated European AT1s to assess relative value.
– It also raised $1.75bn via a PerpNC10 AT1 bond at a yield of 9.25%, a massive 87.5bp inside initial guidance of 10.125% area. If not called before the call date on 13 November 2033, the coupons will reset to the US 5Y Treasury plus 475.8bp then, and every five years thereafter. While the new 9.25% PerpNC10 does not have a direct comparable, they are priced 68bp tighter to UBS’ older 4.375% Perp (callable in February 2031, with a reset of US 5Y Treasury + 331.3bp) that currently yield 9.93%.
Both the junior subordinated notes are rated Baa3/BB/BBB-. Upon the occurrence of a trigger event or viability event a contingent write-down will occur and the full principal amount and any accrued/unpaid interest will permanently be written-down to zero. Steven Boothe, head of global IG fixed income at T. Rowe Price said, “At current yields you are getting decent compensation for these risks”.