UBS To Sell $15-Billion Subprime Mortgage Debt; To Cut 5,500 Jobs
UBS, the Swiss investment bank, seems to have been hit the hardest by the credit crunch. The bank has announced that it would sell $15 billion of subprime mortgage debt and cut 5,500 jobs in its investment banking business as part of a massive cleanup (see a Thomson report).
The subprime crisis in the United States and the worldwide credit market turmoil that followed have taken a heavy toll on UBS. In a hope to reap bigger returns and compete with Wall Street rivals, the Zurich based bank - once known for its conservative investment strategy - heavily invested in the market for subprime mortgage securities. Now UBS is digesting a net loss of $10.9 billion and write-downs on mortgage-backed securities of $19 billion in the first quarter, bringing the total to about $38 billion since the beginning of the crisis.
The losses already have led to the departure of the chief executive, the chairman and other senior managers and prompted UBS to seek emergency investment from funds in Singapore and the Middle East. It is raising more money through a rights issue. On Tuesday, the bank announced plans to get out of the U.S. municipal bond business and said that it had agreed to sell distressed mortgage assets to BlackRock for $15 billion, a 32 percent discount on their nominal value. The assets will be part of a newly created distressed fund managed by BlackRock. The assets sold include long only positions and ’some’ sub-prime exposure, added the report.
