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Appaloosa sues over Credit Suisse AT1 bonds

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Appaloosa Management, the distressed debt-focused hedge fund firm founded by David Tepper and Jack Walton, has become the latest company to file a lawsuit over the wipeout of $17bn of high-risk bonds in UBS Group’s deal last year to save Credit Suisse from total collapse.

The report cites a complaint filed in a federal court in Newark, New Jersey, in revealing that Appaloosa served as investment adviser to Palomino Master and Azteca Partners, who are also plaintiffs in the lawsuit, on their purchases of Credit Suisse’s Additional Tier 1 (AT1s) bonds, which were written to zero just days after the firm acquired them in March 2023.

The suit alleges that, at the time of purchase, Credit Suisse misled them about the state of its financial health, saying the bank’s liquidity position was misrepresented “as very strong and ‘getting stronger’ at a time when there was a run on the bank and Credit Suisse was losing billions of dollars in withdrawals on a daily basis”.

The complaint, which alleges violations of securities laws as well as the New Jersey Racketeer Influenced and Corrupt Organisations Act and is seeking unspecified damages, is one of many filed over the AT1 bond wipeout.

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