Swiss government sells stake in UBS

Update 2  0:30  Update 1  20 August 0:08  Bern, Switzerland (GenevaLunch) – The Swiss government is selling 332.2 million shares in bank UBS, withdrawing “immediately and entirely” its stake in the bank. The announcement was made by Bern after details were published Wednesday 19 August of the Swiss-US out of court settlement in the UBS bank case.

Bern noted that it has asked a banking consortium to use accelerated bookbuildings to immediately dispose of the shares, offered to institutional investors 20 August, although TSR specifies that according to UBS the government’s notes will most likely be converted to shares 25 August and then sold. Bloomberg reports that in a Wednesday telephone interview Peter Siegenthaler, federal finance administration director, said the mandate to sell the shares had been given to three Swiss and foreign banks without providing their names.

The Swiss National Bank responded immediately by saying that it “welcomes the Swiss government’s announcement to reduce its UBS investment. The placement of the shares resulting from the conversion of the Confederation’s mandatory convertible notes is an indication of the market’s confidence that the bank’s resilience has improved further.”

In October 2008, as the world banking crisis was building, the Swiss government provided UBS with a CHF6 billion bailout in the form of mandatory convertible notes, which it is now cashing in – Bern says it expects to recover its investment and make an “adequate” profit. The result of the transaction will be published once it is completed.

The Federal Council notes that “the main objective of the Confederation’s involvement has been fulfilled” thanks to the consolidation of the bank’s capital base and the settlement of the civil court case, which are rebuilding confidence in the bank. UBS can now continue to focus on recovering and restructuring.

The SNB took pains to note in a press release that the government’s withdrawal

has no bearing on the purchase of illiquid assets from UBS  made by the SNB’s special purpose vehicle, the SNB StabFund, or on the management of these assets. The SNB purchased these illiquid assets within the context of its statutory mandate to contribute to the stability of the financial system (art. 5 para. 2 National Bank Act). The assets were taken over definitively by the special purpose vehicle and are being managed according to commercial criteria. The SNB StabFund’s commitment does not represent any form of participation of the SNB in UBS.

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