Various losses, problems with SIVs and a contracting ABCP market have forced assets back onto balance sheets and stretched many banks’ capital ratios. But with investors still wary, banks are paying huge premiums for the precious capital.
UBS priced a €600 million perpetual non-call 10-year issue just days after announcing a $10 billion, sub-prime related write-down. Investors placed over €3 billion of orders with the Swiss bank. But UBS was forced to pay a massive 245 basis points over mid-swaps, more than three times what it would have paid for a comparable deal before the summer.
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