UBS may be forced to buy back $25 billion worth of Auction Rate Securities (ARS) from clients, Bloomberg says. As with the Merrill (MER) and Citi (C) buybacks, the key questions wil be: 1) how will UBS finance the buyback, and 2) will the firm put the ARS on its books at face value…or take another immediate multi-billion writedown?
The UBS news follows promises from Citigroup (C) and Merrill Lynch (MER) to buy back ARS from clients valued at $7.3 billion and $10 billion respectively:
UBS spokesman Mark Arena, asked to comment on a possible settlement, said: “We have consistently worked with regulators toward a comprehensive solution for all ARS investors.’
The Boston Globe reported on its Web site today that UBS has reached an agreement with state and federal regulators to purchase $19.4 billion of the securities and pay $150 million in fines to settle the probes. The newspaper, citing people briefed on the talks, said the deal may be announced today.
The decision by investment banks to abandon the $330 billion auction-rate market in February threatens to compound their losses from the global credit-market contraction. Zurich-based UBS reported a net loss of 25.4 billion Swiss francs ($25.6 billion) in the nine months through March, more than any other bank.
UBS fell 2 centimes to 21.72 francs by 12:12 p.m. in Swiss trading, bringing declines this year to 53 per cent.
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