Letter to our Investors and Partners

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David Z Wang
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Dear Investors and Partners,

I started my career with Morgan Stanley in the last global financial crisis in 2008. On September 29th, 2008, Morgan Stanley was saved by an amazing US$9 billion equity injection by MUFG Japan that stabilized the business and allowed myself to continue in banking for almost a decade after. For this I am thankful. 

Fast forward to 20th March 2023 and we hear the news that UBS has acquired Credit Suisse Bank at 60% below the last market cap. Significantly, Credit Suisse will write down $17 billion of its Additional Tier 1 (AT1) debt to zero on the orders from Swiss regulator FINMA.

The Once Popular AT1 Bond

This means that AT1 bondholders appear to be left with nothing, while shareholders, who by right rank below in the bank's capital structure, will receive the equivalent of 0.76 francs in UBS shares for stock that was worth 1.86 francs on Friday, in a stunning, unprecedented reversal of the payment seniority between AT1 holders and shareholders.

Engineered in the wake of the global financial crisis in 2008, currently $250 billion AT1 instruments sit directly above common equity in the capital structure of banks. When I was in banking, we sold hundreds of millions of AT1 and spent time scrutinizing the various instruments, pretty much like a private investment, with specific legal rights to coupon or conversion. From 2020-2022, AT1s were back to popularity and private banks provided huge leverage to their clients. We always took the view that it was an equity instrument and not comparable to our senior private debt deals. 

The Riskiness of AT1 Revealed

The write-down of Credit Suisse's $17 billion AT1s, by far the largest one of its kind and deemed unthinkable just a few weeks ago, together with the extraordinary de facto subordination of AT1, exposes the inherent riskiness of AT1 instruments. Given our experience in private debt the last 6 years since I left banking, this incident highlights the importance of structural robustness and comprehensive security packages for generating credit alpha. 

Investors - Ensure Seniority in Structured Deal Terms

These include soundly structured deal terms that ensure seniority in the payment waterfall and recourse to security collateral, as well as stringent covenants permitting early intervention and restructuring. Today, private credit emerges as the logical choice for value-driven, risk-minded fixed income investors. Do read more about us at

As we navigate these unprecedented times in the financial industry, we appreciate your ongoing support. We remain committed to keeping you informed of any developments and to working diligently to manage risk and generate positive returns for our investors.

Yours Sincerely,

David Z Wang

Group CEO and Co-Founder


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