UBS makes $10 bn writedown, raises new capital

UBS makes $10 bn writedown, raises new capital


Zurich: Swiss bank UBS announced $10 billion in fresh subprime writedowns on Monday, 10 December, and said it had obtained a huge injection of fresh capital from a Singapore government entity and an unnamed Middle East investor.

UBS, which has been severely battered by the US subprime mortgage meltdown, also said it expected to make a fourth-quarter loss, reversing previous guidance, and said it may also register a loss for 2007 as a whole.

UBS said it had made a 13 billion Swiss franc ($11.48 billion) issue of fresh capital, 11 billion francs of which were to be placed with the Government of Singapore Investment Corporation (GIC) and 2 billion francs with a Middle East investor.

A financial source said the Middle East investor was believed to be the government of Oman.

The announcement comes on the eve of an investor day in London on Tuesday at which chief executive officer Marcel Rohner and other top managers are due to address analysts and investors.

The bank also said it would approve the resale of 36.4 million treasury shares previously intended for cancellation, increasing Tier-1 capital by about 2 billion francs.

It also proposed replacing the 2007 cash dividend with a bonus stock issue which would boost Tier-1 capital by 4.4 billion francs.

Together with the capital increase, Tier-1 capital would be raised by a total of 19.4 billion francs, boosting its Tier-1 capital ratio to 12%.

The two investors were subscribing to an issue of mandatory convertible notes carrying a coupon of 9 percent until conversion into ordinary shares which must take place within approximately two years of the issue.

The GIC manages Singapore’s foreign reserves.