Credit Suisse bondholders sue Swiss regulator over write down -...

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Credit Suisse (CSGN.S) investors who held a total of more than 4.5 billion Swiss francs ($5 billion) of the bank's Additional Tier 1 (AT1) bonds have sued the Swiss banking regulator, challenging the legality of writing them down.

AT1 bonds totaling 16 billion Swiss francs were wiped out last month during the state-backed rescue of Credit Suisse by its Swiss rival UBS (UBSG.S), angering bondholders who thought they would be better protected than shareholders.

The lawsuit, filed on April 18 by Quinn Emanuel Urquhart & Sullivan, challenges FINMA's decision leading to the write-down, the law firm representing the bondholders said on Friday.

"FINMA's decision undermines international confidence in the legal certainty and reliability of the Swiss financial center," Thomas Werlen, the firm's managing partner in Switzerland, said in a statement.

FINMA declined to comment on the lawsuit. Credit Suisse did not immediately respond to a Reuters request for comment.

'VIABILITY EVENT'

FINMA said last month that its decision to impose steep losses on some bondholders was legally watertight because the bond prospectuses and emergency government legislation allowed for a total write down in a "viability event".

Engineered in the wake of the global financial crisis, AT1 bonds were designed to ensure investors, not taxpayers, carry the burden of risk if a bank runs into trouble.

Bondholders have been seeking legal advice since the rescue upended a long-established practice of prioritizing bondholders over shareholders in a debt recovery and a number of claims have already been filed in Switzerland over the terms of the deal.

The Federal Administrative Court said it was still receiving complaints, but declined to name claimants or comment on how many had been lodged by bondholders or their lawyers.

Some investors have been trading the notes at penny prices in a so-called litigation play, betting that successful legal claims will boost values in the future, lawyers have said.

Credit Suisse bondholders sue Swiss regulator over write-down

Credit Suisse

Bondholders

Swiss

Regulator

Over

Write-Down