UBS announces today that it is making a cash tender offer in relation to five Swiss franc, euro or pound sterling subordinated bonds and six Swiss franc, euro, Italian lira or pound sterling senior unsecured bonds, for a maximum aggregate principal amount of EUR 1.75 billion, equivalent to approximately CHF 2.15 billion. The offer is subject to increase or decrease and other conditions as set out in the tender offer memorandum. The subordinated bonds subject to this offer count as tier 2 capital under the BIS Basel III phase-in rules currently in effect, but are not eligible as tier 2 capital on a BIS Basel III fully applied basis.
This transaction is consistent with our proactive approach to reducing our balance sheet and future interest expense while maintaining our strong liquidity, funding and capital position.
We estimate that the transaction will reduce our BIS Basel III phase-in total capital ratio by 0.2% - 0.5%. We expect to incur a small loss on this transaction, which we expect to recover in the short-term through the reduction in future interest expense. The repurchase of the tier 2 bonds will not affect our CET1 ratio, but the expected loss associated with this transaction may have an insignificant effect on it.
The tender offer period will end on 13 December 2013, unless extended, re-opened or earlier terminated as provided in the tender offer memorandum.
