Swiss state sells UBS stake

THE SWISS government has turned a 1.2 billion Swiss franc (€792 million) profit on its 10-month investment in UBS, in what bankers involved called a “private equity-style” return.

The deal had been expected after this week’s settlement of a long and bitter tax dispute between the bank and the US authorities and leaves UBS free of government influence and focused fully on its own affairs.

Bern received almost SFr5.5 billion (€3.6 billion) for the SFr6 billion (€3.95 billion) in mandatory convertible notes it bought in October as part of a government bailout of Switzerland’s biggest bank.

The notes converted into about 332 million UBS shares – a roughly 9 per cent stake.

The shares were then placed at SFr16.50 (€10.8) – a 1.4 per cent discount to Wednesday’s close and at the top of the SFr16 to SFr16.50 range indicated.

The deal was four times subscribed.

Separately, UBS agreed to pay the government about SFr1.8 billion (€1.9 billion) up front in lieu of future interest payments on the securities.

This leaves the Swiss authorities with a total of SFr7.2 billion (€4.75 billion) – or an annualised return of about 26 per cent.

Switzerland’s business-friendly ruling coalition had always said it would retain a hands-off approach to the bank and sell its stake as soon as possible.

Nevertheless, the bank became a political target amid left-wing calls for boardroom representation and caps on executive pay.

Left-wing parties yesterday said the government should have waited until the bank, which lost SFr1.4 billion (€923 million) in the second quarter, regained lasting stability.

Analysts welcomed the deal, however, which was arranged by Credit Suisse, Morgan Stanley and UBS, with Credit Suisse advising the Swiss government. – (Copyright The Financial Times Limited 2009)