Neuste Medienmitteilungen


UBS launches synthetic securitization

| Media Releases Switzerland

UBS is to launch HAT II, another synthetic transaction securitizing part of the risks attached to Swiss small-business loans and turning them into tradable instruments. HAT II offers institutional investors an attractive vehicle for portfolio diversification by investing in Swiss SME credit risks. At the same time, UBS is optimizing the risk/return profile of its domestic credit portfolio.

Medium-term bonds

Duration

New Rate

Old Rate

2 years

0.50 %

0.75 %

3 years

0.75 %

0.875 %

4 years

0.875 %

1.125 %

5 years

1.125 %

1.375 %

6 years

1.375 %

1.625 %

7 years

1.625 %

1.75 %

8 years

1.75 %

2.00 %

Time deposit accounts

Duration

New Rate

Old Rate

2 years

0.50 %

0.75 %

3 years

0.75 %

0.875 %

4 years

0.875 %

1.125 %

5 years

1.125 %

1.375 %

6 years

1.375 %

1.625 %

7 years

1.625 %

1.75 %

8 years

1.75 %

2.00 %

9 years

2.00 %

2.125 %

10 years

2.125 %

2.25 %

UBS is to securitize part of the credit risks attached to a CHF 2.5bn portfolio of loans to Swiss small and medium-sized enterprises (SMEs). The transaction will involve transferring not the loans themselves, but merely the default risks to the capital market. These risks will be turned into tradable instruments by issuing floating-rate notes that will be placed publicly on the EUR capital market and subsequently listed on the Irish Stock Exchange.

This transaction, called HAT (Helvetic Asset Trust) II (see enclosed description for more details), offers investors the opportunity to diversify their portfolios by investing in Swiss SME credit risks. The notes issued will also offer a higher yield than conventional notes of comparable quality. UBS's first HAT transaction, launched in June 2000, had a similar structure, but involved CHF-denominated instruments. UBS uses this form of hedging transaction to actively manage its credit portfolio, thereby optimizing the portfolio's risk/return profile. The transaction will have no effect whatsoever on the client relationship, since all loans will continue to be carried on-balance-sheet. UBS will still be responsible for the credit management of these loans and for servicing the clients.

HAT II transaction: four classes of notes
HAT II is a synthetic collateralized loan obligation (CLO) aimed at partially hedging the risk of losses on the underlying credit portfolio by transferring this risk to the capital market. The underlying portfolio contains loans to some 1,450 small and medium-sized corporate clients of UBS totalling CHF 2.5bn.

HAT (Helvetic Asset Trust) II Limited was set up independently of UBS as a special-purpose vehicle (SPV) with a separate legal entity and its own staff, specifically designed to assume and transfer the credit risk to the capital market. Under the terms of a credit default swap with UBS, HAT II Ltd will assume a credit risk of up to CHF 235m (EUR 160m) in return for a regular premium. The first CHF 150m of losses incurred (6.0% of the underlying portfolio) will be borne by UBS itself as a form of retention.

HAT II Ltd will in turn transfer the credit risk assumed under the swap agreement to the capital market by issuing four classes of notes with a total value of EUR 160m. As their repayment is linked to the losses on the underlying credit portfolio, the notes effectively cover any loan losses incurred by UBS in excess of the CHF 150m mentioned above. They have a fixed term to maturity of five years and are subdivided into four hierarchical classes, each subordinated to the next higher class and each with ratings from Moody's and Fitch:

  • Class A, with a total face value of EUR 88m and ratings of Aaa (Moody's) and AAA (Fitch)

  • Class B, with a total face value of EUR 34m and ratings of Aa2 (Moody's) and AA (Fitch)

  • Class C, with a total face value of EUR 18m and ratings of A1 (Moody's) and A+ (Fitch)

  • Class D, with a total face value of EUR 20m and ratings of Baa1 (Moody's) and BBB+ (Fitch)

If the cumulative losses exceed CHF 150m, the D tranche will not be repaid in full. The corresponding cut-off point for the C tranche is CHF 179m, for the B tranche CHF 206m and for the A tranche CHF 256m.

The proceeds from the note issue will be invested in commercial paper of outstanding credit quality or in triple-A debt securities under a repurchase agreement.

Zurich / Basel, 11 March 2003
UBS AG