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tophaj t1_jeew3zt wrote

This is because of the type of bond these bond holders held. It's called AT1 (additional tier 1) bond where in the event of issuers default, they are the first one to be written off in order to contain/cushion the blow of the default. They should have known the risk so I don't know how much legal leg these bond holders have against credit Suisse

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KutteKiZindagi t1_jeezk9r wrote

Not exactly. And this is why the bond holders are suing.

Bong holders are always paid before stock holders. And this tier was supposed to sit between bonds and stocks. Higher risk than bonds but higher yields than bonds and lower risk than stocks.

Technically stocks would have to be wiped first. Then tier 1 bonds and if any money is left of the bankruptcy proceeding it may go to bond holders or sometimes in restructured organization bond holders get shares of the new company.

Tier 1 bonds only lose out IF everyone in stocks lose out and there is no money even after that.

This is the hierarchy. However it was violated. Thats why EU and US insisted that this was wrong and are distancing themselves from it. https://www.srb.europa.eu/en/content/eu-regulators-distance-themselves-credit-suisse-bond-writedowns

Why? most likely some powerful stock holders. Not sure.

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0x11C3P t1_jef1lwp wrote

This minus last conspiracy. Bondholders, even AT1, should have gotten paid out first over equity holders.

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frobinhood t1_jefdzv6 wrote

no it shouldnt have because even in their disclosure it was above stocks in the order of write offs. the swiss follow the exact letter of the law. the only reason other countries are "distancing" themselves from it is because they dont want a mass sell off on that type of security, which was always meant to be risky thus the high yield. It is also why people are "considering" legal actions instead of wasting money fighting it since they have no case. read CS's disclousre for those bonds, they got a chart describing exactly that.

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DhairyaVed OP t1_jeeyscr wrote

so any bank can just wipe off the bond any time they are not able to pay the depositor

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VisualMod t1_jeeuty0 wrote

>The reason is that the shareholders are more important than the bondholders.

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frobinhood t1_jef0gyw wrote

because the bond they were holding are meant to be written off to save the balance sheet. its entire purpose was to get written off when the bank faces financial trouble, thats why it paid some crazy return like 12%. not all bonds are same, CS was very clear on their paperwork and website regarding those bonds they even have them above stocks in the pecking order of what to get written off first. only idiots think this is something strange, the world of finance is more complicated than what these reddit armchair expert think.

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DhairyaVed OP t1_jef8jjl wrote

the logic is bond holder are always paid before shareholder

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frobinhood t1_jefciv4 wrote

how many times do i have to write THERE ARE DIFFERENT TYPES OF BONDS before you understand? read the description of those bonds in their investor disclosure jesus christ.

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