UBS AG (UBSN), the Swiss bank exiting certain businesses to bolster capital, is seeking buyers for about $800 million of distressed corporate debt, according to two people with knowledge of the matter.
The holdings are managed by a team headed by Jeff Teach and are part of a pool of mostly fixed-income assets that UBS moved to a separate unit within the past year with the intention of selling, said the people, who asked not to be identified because the auction is private. One option for potential bidders may be to hire Teach, a managing director, and his group along with buying the assets, the people said.
The bank had approached hedge funds in July marketing about $1 billion of the debt, one of the people said. Karina Byrne, a spokeswoman for Zurich-based UBS, declined to comment.
Chief Executive Officer Sergio Ermotti is reconstructing Switzerland’s biggest bank, retreating from capital-intensive trading businesses and focusing on its wealth management unit as regulations from the Basel Committee on Banking Supervision require more capital for some activities, cutting profitability. UBS, bailed out by the Swiss government during the 2008 financial crisis, announced plans last year to cut 10,000 jobs and scale back its investment bank.
UBS moved assets from the investment bank to a so-called non-core unit as it works to unwind holdings no longer considered essential and that erode capital-level measures tracked by regulators.
The 47.6 billion francs ($51.1 billion) of risk-weighted assets in non-core at the end of June included 5.3 billion francs of loans and distressed debt, down from 7.3 billion three months earlier, according to a quarterly report filed with the U.S. Securities and Exchange Commission. That also included 800 million francs of primarily credit-default swaps and 1.4 billion francs of structured credit positions as of June 30.
“Significant progress was made in reducing more liquid cash and loan positions” in the unit, UBS said in the filing.
The bank cut 20 billion francs of risk-weighted assets in the second quarter, surpassing its target for the end of the year. That helped bring UBS’s common equity ratio under the latest Basel rules to 11.2 percent from 10.1 percent at the end of March. Ermotti is seeking to increase the ratio to 13 percent.
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