Hedgeweek on the Credit Suisse AT1 Write-Off and a Market Paradigm Shift

David Nazar
Founder & CIO
April 5, 2023
9:00 am

Hedgeweek examines the Credit Suisse AT1 write-off and its implications for bank capital structures, investor protections and loss hierarchy across stressed scenarios.

Hedgeweek examines the Credit Suisse AT1 write-off as part of a broader shift in market dynamics, noting how recent events reset expectations around risk transfer and investor protections in bank capital structures.

The decision to write down AT1 instruments during the UBS rescue prompted a reassessment of subordination, legal terms and recovery assumptions across the capital stack. Investors scrutinised prospectus language on triggers, permanent write-down versus conversion mechanics, and clauses capable of altering the customary loss hierarchy in stressed scenarios.

Market implications were significant. Pricing across bank capital widened, primary issuance paused before returning more selectively, and documentation diligence moved to the foreground. For background on how AT1 bonds function and where risks sit, see the Reuters explainer on AT1 bonds.

We continue to monitor developments in bank capital and liability structures within the context of Distressed and Stressed Credit, focusing on downside analysis, legal positioning and recovery pathways.

You can read the full Hedgeweek article here.

Capital Structure, Credit Markets, European Credit, Hedgeweek, Market Dislocation, Opportunistic Credit, Stressed and Distressed Credit

David Nazar

David Nazar is Founder and Managing Partner, Chief Investment Officer at Ironshield Capital Management, where he leads the firm’s European corporate credit strategies. He oversees investment direction, portfolio construction and risk management across event-driven, stressed and high yield credit mandates. David works closely with the investment team to identify relative value opportunities across complex capital structures, with a disciplined focus on fundamental analysis, downside protection and compounding absolute returns across market cycles.