The largest local group is made up of mostly Singaporeans, and law firm Withers said that their numbers are growing by the day. — Reuters
SINGAPORE: Some 100 investors have joined a class action to recover about US$100mil (RM444mil) in losses stemming from the collapse of Swiss lender Credit Suisse and the subsequent wiping out of their Additional Tier-1 (AT1) bond holdings.
The largest local group is made up of mostly Singaporeans, and law firm Withers said that their numbers are growing by the day.
In the emergency takeover of Credit Suisse by rival UBS in March, Swiss regulator Finma had ordered 16 billion Swiss francs (US$18bil or RM80bil) of the troubled bank’s AT1 bonds to be written down.
The move angered holders globally, given that bond holders typically sit higher on the priority ladder than shareholders when it comes to repayment in a bankruptcy.
Instead, holders of the Credit Suisse AT1 bonds – also known as contingent convertible bonds – received nothing, whereas shareholders received US$3.23bil (RM14bil).
The investors who have joined the class-action suit under Withers are mostly in their 50s who said they have been striving to save for their retirement. Many of them bought one lot of the Credit Suisse AT1 bonds, which was priced at US$200,000 (RM888,000).
“Just because we have a pot of hard-earned money that qualifies us to buy a broader range of financial instruments does not make us more financially savvy,” said a 55-year-old businessman from the manufacturing sector who spends much of his time abroad.
Most investors interviewed saw themselves as having a conservative risk profile.
Under ordinary circumstances, it would have been reasonable for banks and financial institutions to recommend most types of bonds to such investors, as bonds are considered a safe asset class.
However, as the CS AT1 bond contained a clause which, when triggered, would wipe out its value, many of the investors felt that it should not have been sold to them. Some claimed that the clause was not highlighted to them.
A Malaysian homemaker who bought about US$1.25mil (RM5.55mil) worth of AT1 bonds told The Straits Times that she borrowed US$200,000 in 2022 for the purchase.
She felt she was wrongly profiled by her bank’s relationship manager, whom she said had filled out her forms on her behalf.
These forms typically cover various areas, such as trading services and an analysis of one’s financial needs.
A 54-year-old self-employed man said that he had signed a stack of blank forms that his relationship manager subsequently filled in for him.
He claimed he was unaware that the documents had categorised him as an aggressive risk-taker until after the bonds turned worthless.
While the self-employed man has joined the class action, the housewife did not because she could not afford to pay the upfront fee.
An investor in his 50s who runs his own business said that he plans to sue the banks and financial institutions that had sold him the bonds for potential misrepresentation and mis-selling.
According to him, the relationship manager was not proficient in her knowledge about the bonds, and did not adequately highlight their risks.
When news about the bank’s financial problems started to surface, she continued to tell him not to worry, “and I was naive enough to believe her“, he said.
Meanwhile, the class action being led by Withers is expected to be filed by the end of this month.
“We are adopting a Singapore-centric approach, with emphasis on rights arising from the Singapore-Switzerland free trade agreement,” said Shaun Leong, a partner at the firm. He added that the firm had organised a townhall and had reached the milestone because of the work “we have been doing since the Credit Suisse collapse”.
The Straits Times understands that the class action focuses on the free trade agreement signed in 2003 between Singapore and the European Free Trade Association, which includes the Swiss state. — The Straits Times/ANN
