UBS Flags Lyondell Exposure; Write-Down Fears
07.01.09, 17:01 Uhr |
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ZURICH -(Dow Jones)- Switzerland's largest bank, UBS AG (UBS), Wednesday confirmed it has exposure to troubled chemicals company LyondellBasell Industries, raising market concerns that it may make further write-downs in the first quarter of this year.
UBS said all of its exposure to LyondellBasell, whose U.S. arm filed for Chapter 11 bankruptcy protection Tuesday, had already been declared in its third-quarter earnings report. It didn't provide more current information or specify the exact amount of the LyondellBasell exposure.
"As disclosed in third-quarter results UBS has a remaining net exposure of $4.7 billion to leveraged finance commitments, which we continue to actively manage," the Zurich-based bank said. "Our credit exposure to LyondellBasell is included in this overall exposure. We do not disclose exposure to individual counterparties," UBS wrote.
A UBS spokeswoman said she couldn't comment on whether any write-downs tied to LyondellBasell have already been made.
"It's definitely not good news," Bank Vontobel analyst Teresa Nielsen said, noting that the statement has done little to clarify the situation.
She estimates UBS's LyondellBasell exposure at $500 million to $1.5 billion, an amount that could prompt write-downs of $500 million to $1 billion in the first quarter.
Such a step would leave UBS with a 10.8% Tier 1 capital ratio - a measure of financial strength - which would still be good by international standards, the analyst said.
Nielsen has a buy rating and a price target of 22 Swiss francs for UBS.
On the Swiss bourse at 1320 GMT, the shares were down 1.5%, or CHF0.24 to CHF15.85, in a slightly weaker general market.
UBS, which was among global banks that were massively hit by the U.S. mortgage crisis, in November reported a third-quarter net profit of CHF296 million ($266 million) compared with a net loss of CHF858 million in the year-earlier period.
It gave a downbeat outlook for the fourth quarter at that time, and there has been speculation it may face further charges due to the ongoing financial crisis.
UBS took billions of dollars in write-downs last year due to its investment in U.S. subprime securities and became the only Swiss bank so far to seek government aid in 2008.
UBS's prospects seem to improve after the bank in late December sold its entire 1.33% stake in Bank of China Ltd. (3988.HK), which should generate an estimated gain of several hundred million dollars in the fourth quarter of 2008.
UBS is set to report fourth-quarter earnings Feb. 10.
Netherlands-based LyondellBasell Tuesday put its U.S. operations and a European holding company into bankruptcy, shortly after it was supposed to make $280 million in payments to lenders.
The company was created in 2007 after Dutch chemical company Basell International Holdings BV bought Houston-based Lyondell Chemical for $12.7 billion.
UBS was part of the bank syndicate that provided an $8 billion bridge loan for the transaction.
"As disclosed in third-quarter results UBS has a remaining net exposure of $4.7 billion to leveraged finance commitments, which we continue to actively manage," the Zurich-based bank said. "Our credit exposure to LyondellBasell is included in this overall exposure. We do not disclose exposure to individual counterparties," UBS wrote.
A UBS spokeswoman said she couldn't comment on whether any write-downs tied to LyondellBasell have already been made.
"It's definitely not good news," Bank Vontobel analyst Teresa Nielsen said, noting that the statement has done little to clarify the situation.
She estimates UBS's LyondellBasell exposure at $500 million to $1.5 billion, an amount that could prompt write-downs of $500 million to $1 billion in the first quarter.
Such a step would leave UBS with a 10.8% Tier 1 capital ratio - a measure of financial strength - which would still be good by international standards, the analyst said.
Nielsen has a buy rating and a price target of 22 Swiss francs for UBS.
On the Swiss bourse at 1320 GMT, the shares were down 1.5%, or CHF0.24 to CHF15.85, in a slightly weaker general market.
UBS, which was among global banks that were massively hit by the U.S. mortgage crisis, in November reported a third-quarter net profit of CHF296 million ($266 million) compared with a net loss of CHF858 million in the year-earlier period.
It gave a downbeat outlook for the fourth quarter at that time, and there has been speculation it may face further charges due to the ongoing financial crisis.
UBS took billions of dollars in write-downs last year due to its investment in U.S. subprime securities and became the only Swiss bank so far to seek government aid in 2008.
UBS's prospects seem to improve after the bank in late December sold its entire 1.33% stake in Bank of China Ltd. (3988.HK), which should generate an estimated gain of several hundred million dollars in the fourth quarter of 2008.
UBS is set to report fourth-quarter earnings Feb. 10.
Netherlands-based LyondellBasell Tuesday put its U.S. operations and a European holding company into bankruptcy, shortly after it was supposed to make $280 million in payments to lenders.
The company was created in 2007 after Dutch chemical company Basell International Holdings BV bought Houston-based Lyondell Chemical for $12.7 billion.
UBS was part of the bank syndicate that provided an $8 billion bridge loan for the transaction.
Company Web site: www.ubs.com
-By Martin Gelnar, Dow Jones Newswires, +41 43 443 8042; martin.gelnar@dowjones.com
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