Did bondholders believe AT1 holders were safer than shareholders in UBS rescue?

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Bondholders Claimed Greater Protection Than Shareholders in UBS Rescue

Bondholders representing US$4.5 billion of Credit Suisse's Additional Tier 1 (AT1) bonds have initiated legal action, asserting that the Swiss regulator, Finma, acted unconstitutionally by ordering the cancellation of their debt. This decision has caused significant anger among these bondholders, who believed their position would be more secure than that of shareholders during the UBS rescue. The lawsuit was lodged by the law firm Quinn Emanuel in St. Gallen, Switzerland.
Legal Challenge Against Finma's Decision

A group of Credit Suisse AT1 bondholders, holding approximately US$4.5 billion of the US$17 billion in bonds that were rendered worthless, have filed a lawsuit against the Swiss financial market supervisory authority, Finma. The core of their legal challenge is the assertion that Finma's directive to cancel the AT1 debt was unconstitutional. This legal action signifies a direct confrontation with the regulator's authority and the handling of the Credit Suisse crisis.
Bondholders' Expectation of Safer Status

The decision by Finma to wipe out the AT1 bonds has been met with considerable dismay by the affected bondholders. They had operated under the assumption that, in the event of a rescue scenario involving UBS, bondholders would receive preferential treatment and be in a more protected position compared to equity shareholders. The abrupt cancellation of their investment contradicted this fundamental expectation, leading to their current legal recourse.
Lawsuit Filed in St. Gallen

The formal legal challenge against Finma was initiated by the law firm Quinn Emanuel on behalf of the bondholder group. The lawsuit was filed in the city of St. Gallen, located in eastern Switzerland. This legal filing marks a significant step by the bondholders to seek redress for what they perceive as an unjust and unconstitutional action by the Swiss banking regulator.

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Did bondholders believe AT1 holders were safer than shareholders in UBS rescue?

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