The Wall Street Journal-20080112-Credit Crunch- UBS Seeks Shareholder Support For Planned Capital Increase
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ZURICH -- UBS AG reached out to shareholders Friday to win support for a planned capital increase, as expected, in a move to help the bank protect its balance sheet in the wake of massive cuts on its subprime holdings.
UBS has won backing from Government of Singapore Investment Corp. and an unidentified Middle Eastern investor. The two are set to invest about 13 billion Swiss francs ($11.8 billion) in Switzerland's largest bank, which was forced to write down $14.2 billion related to its subprime holdings last year.
The bank, among the hardest hit by the U.S. subprime-mortgage downturn, said it was confident of staging a turnaround but warned the crisis was far from over and that the final impact on its business was still difficult to gauge.
"We can't, at this time, accurately predict the future development of U.S. residential mortgage markets and the ultimate impact on our positions in subprime mortgage related securities," UBS Chairman Marcel Ospel and Chief Executive Marcel Rohner said in a letter to shareholders. "However, we are confident that, after the proposed capital improvement, our capital position would remain strong even if conditions in the U.S. housing market were to continue to deteriorate to levels below those that are currently anticipated," they said.
UBS will hold an extraordinary general meeting Feb. 27 in Basel, Switzerland, where holders will vote on the capital-increase measures.
Although the move has been hailed by some investors as an elegant step to protect the bank's balance sheet and ensure that its large and profitable wealth-management operations remain healthy, several shareholders said the transaction favored the new shareholders at the expense of existing ones.
Shares in UBS were nearly flat Friday at CHF49.04 francs in an overall weaker market. The stock has lost 6.4% this year so far, adding to last year's 29% drop.
