Liar Liar, Bonds on Fire! Credit Suisse in Hot Water

Investors Get Burned and Appaloosa LP Sues for Shady Business

Appaloosa LP is suing former Credit Suisse over some shady business. They're saying that Credit Suisse misled investors about their liquidity while they were dealing with a deposit run, which led to $17 billion of Credit Suisse's bonds being wiped out to zero in a rescue orchestrated by UBS. Appaloosa is claiming that Credit Suisse's CEO Ulrich Koerner and former Chairman Axel Lehmann lied to the market about the bank's liquidity falling apart and they're seeking damages under both U.S. securities laws and a New Jersey racketeering law.

The whole thing is causing a stir in the financial world, and it's no wonder - investors lost a lot of money when they bought some Additional Tier 1 (AT1) bonds from Credit Suisse, only to see them become worthless just 1-1/2 weeks later. It's not a good look for Credit Suisse and it's casting some doubt on the value of AT1 bonds in general.

It's not just Credit Suisse in the hot seat, either. Switzerland's financial regulator FINMA didn't have any obligation to pay Credit Suisse's AT1 bondholders when they seized the bonds as part of the rescue, which has led to a bunch of lawsuits being filed in the U.S. and Europe.

It'll be interesting to see how this all plays out, but for now, UBS, who bought Credit Suisse for $3 billion, isn't saying much. The lawyer for Appaloosa and the investors, Azteca Partners LLC and Palomino Master Ltd, isn't giving any hints either. But one thing's for sure - this lawsuit sizzles!

#distressed