S&P cuts Credit Suisse hybrids

S&P said it downgraded Credit Suisse Group AG’s additional tier one (AT1) capital to C from B and B+ after the Swiss Financial Market Supervisory Authority decided that about CHF 16 billion of the securities will be written down to zero. The agency said it expects them to be in default in the near term. S&P said it also placed Credit Suisse Group’s ratings, including its BBB- issuer rating, on CreditWatch with positive implications.

The positive watch follows Credit Suisse and UBS Group AG agreeing to a merger, in which UBS will be the survivor. The deal is expected to close by the end of June.

“We consider the UBS group to be materially stronger than the Credit Suisse group. The acquisition will therefore benefit it by stabilizing its franchise, as well as its funding and liquidity. It should also prompt a strengthening of Credit Suisse's governance and risk management standards,” S&P said in a press release.

UBS Group, the group's nonoperating holding company, will take over all the instruments issued by Credit Suisse Group and UBS operating entities will take over all instruments issued by Credit Suisse operating entities, the agency noted.

S&P said it expects to upgrade Credit Suisse’s ratings once the deal closes.

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