Twitter CEO Elon Musk has expressed his shock that investment banking company UBS would get a $100 billion emergency credit line as part of a $2 billion deal to buy rival Credit Suisse.
Taking to Twitter, Musk responded to a tweet linking to an article reporting on the deal between the two financial institutions which was announced on March 19.
Deal Will ‘Protect Swiss Economy’
Under the deal, which was mediated by the Swiss federal government, UBS is buying Credit Suisse for around $3.23 billion. Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares held, equivalent to CHF 0.76 per share, which is substantially less than Credit Suisse’s closing price of CHF 1.86 on March 17.SNB said it will also provide more than 100 billion Swiss francs of liquidity to UBS in order to help facilitate a smooth deal.
“In addition, and based on the Federal Council’s Emergency Ordinance, Credit Suisse and UBS can obtain a liquidity assistance loan with privileged creditor status in bankruptcy for a total amount of up to CHF 100 billion ($108 billion),” SNB said.
“Furthermore, and based on the Federal Council’s Emergency Ordinance, the SNB can grant Credit Suisse a liquidity assistance loan of up to CHF 100 billion backed by a federal default guarantee. The structure of the loan is based on the Public Liquidity Backstop (PLB), the key parameters of which were already decided by the Federal Council in 2022,” the bank added.
Credit Suisse Customers Pull Deposits
The bank said in a statement on March 16 that it intends to exercise its option to borrow up to 50 billion Swiss francs from the SNB under a covered loan facility as well as a short-term liquidity facility, which are fully collateralized by high-quality assets.However, the announcement of the new line of credit appeared to do little to quell customer fears, and depositors continued to withdraw their money, sending Credit Suisse’s stock plunging and sparking financial contagion concerns among government officials.
Credit Suisse has had a turbulent 12 months after being hit with a number of scandals, including leaked documents allegedly identifying more than 18,000 accounts belonging to foreign customers, including criminals, dictators, and sanctioned political actors who stashed their money at the Swiss firm.