UBS sells sub-prime, Alt-A debts to Blackrock

UBS sells sub-prime, Alt-A debts to Blackrock


ZURICH – Swiss banking giant UBS said on Wednesday it had completed the sale of US$15 billion of sub-prime and Alt-A US residential mortgage-backed securities to a fund managed by BlackRock.


‘Risk reduction remains a critical part of our ongoing financial restructuring and this sale is a big step towards further reducing our positions in this asset class,’ said Marcel Rohner, chief executive of UBS.


Mr Rohner had earlier confirmed the sale, but did not reveal details.


The positions with a nominal value of about US$22 billion were sold at a discount of US$15 billion to the newly created distressed asset fund.


UBS said that most of the positions are sub-prime and Alt-A – which is in between prime and sub-prime, and the remainder is prime.


The bank also said the fund purchased the securities using about US$3.75 billion in equity raised by BlackRock from investors and a multi-year collateralised term loan of about US$11.25 billion provided by UBS.


UBS said it had no equity stake in the fund. ‘We have no equity stake but we will share the performance fees,’ said a spokesman for the bank. The fund must achieve a certain performance — a so-called hurdle return — before UBS will be able to share performance fees with Blackrock, she said.


‘There is a hurdle return for the equity investors, and once that is reached then we share the fees,’ she said.


The transaction has closed, added the bank.


UBS, which has been forced to take massive writedowns due to the crisis, reported net loss for the first three months of the year of 11.54 billion Swiss francs.


It has written down over US$37 billion since the sub-prime crisis started. — AFP


Source: Business Times

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