UBS to Write Down Another $10 Billion
UBS (UBS) on Monday said it would write down an additional $10 billion worth of collateralized debt obligations exposed to U.S. subprime mortgages.
The Zurich-based investment bank also said it would receive a cash infusion of $11.5 billion from two big investors, according to a press release. The government of Singapore is injecting roughly $9.7 billion, giving it roughly a 9% stake in UBS, while an unnamed investor in the Middle East is purchasing $1.7 billion.
Earlier this year UBS had to shut down its alternative asset-management firm Dillon Read Capital due to subprime losses. In October it took a $3.4 billion writedown based on the declining values of its collateralized debt obligations, or CDOs.
The company said that it expects to record a net loss for the fourth quarter and that "it was now possible" that UBS would record a net loss, attributable to shareholders, for 2007."In response to continued deterioration in the U.S. subprime mortgage securities market, partly driven by increased homeowner delinquencies but mainly fueled by worsening market expectations of future developments, UBS has revised the assumptions and inputs used to value U.S. subprime mortgage-related positions," the company said in a release. The writedowns were on CDOs and "super senior" holdings, UBS said. "Conditions in the U.S. mortgage and housing markets have continued to deteriorate and we have updated our loss assumptions to the levels implied by the current distressed market for mortgage securities," said UBS group CEO Marcel Rohner, in a statement.
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