UBS to Buy Credit Suisse for $1 Billion (FT)

An agreement between the two Swiss banks has been reached according to the Financial Times.

It’s the dawn of a new era in the history of European and world finance. 

An era marked by the disappearance of a bank created 167 years ago, but which was weighed down by repeated scandals.

Credit Suisse, once a Swiss and European financial flagship, will be swallowed up by its rival and compatriot UBS for only one billion dollars, in a bid to restore confidence around the banking sector, reports the Financial Times.

To restore calm as quickly as Credit Suisse recorded some 10 billion Swiss francs in outflows in one week, the Swiss authorities urged UBS to acquire Credit Suisse. Discussions were held throughout the weekend with the aim of having an agreement before the opening of the Asian markets on Monday.

According to the article, to expedite things and calm down the markets, the Swiss authorities plan to change the regulatory laws of the country requiring that a merger or acquisition be validated by the shareholders via a vote.

UBS offers a price of 0.25 Swiss franks per share to be paid in UBS stock, according to the FT. 

UBS also insisted to have a material adverse change clause that voids the deal, if its credit default swaps spreads jump by 100 basis points or more.

A credit default swap (CDS) is a form of insurance for bondholders. When the cost of a CDS rises, it suggests that investors lose confidence that the company will be able to honor its debts.

Credit Suisse and UBS didn’t immediately respond to requests for comment. 

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