Hedge fund made $30 million in days thanks to a well-timed bet on Credit Suisse’s problems

A general view of Credit Suisse in the Canary Wharf business district on October 03, 2022 in London, England.
Marathon Asset Management reportedly made $30 million in just days from a bet on Credit Suisse bonds.
Dan Kitwood—Getty Images

It’s been a tumultuous few weeks for Swiss lender Credit Suisse—but one hedge fund has reportedly won big from the bank’s collapse and subsequent rescue.

Credit Suisse was bought out by rival UBS earlier this month in a $3.25 billion deal backed by the Swiss government, with the bank agreeing to be taken over amid concerns about its viability as a business.

The historic rescue deal came after a crisis in confidence led to more than $100 million of assets being pulled out of the bank in the final three months of 2022, following years of scandals, leadership problems, and legal issues.

Days before the UBS takeover was announced, Credit Suisse said it would borrow as much as 50 billion Swiss francs ($54.5 billion) from Switzerland’s central bank and buy back around $3 billion in debt at an inflated price.

Bloomberg reported on Friday that New York–based Marathon Asset Management had accumulated around $150 million worth of bonds in Credit Suisse’s senior operating company (OpCo) days before the bank made its offer to buy back the debt, citing an anonymous source.

According to the publication, Marathon bought the bonds at a reduced price—and made around $30 million within a few days thanks to its well-timed bet on the securities.

Representatives for Marathon did not respond to Fortune’s request for comment.

Big bet on bonds

Marathon Asset Management chair and CEO Bruce Richards confirmed in an interview with Bloomberg television last week that the hedge fund had indeed made a big bet on Credit Suisse bonds.

“We went out and bought a very large position in short-dated Credit Suisse bonds…and those bonds were then tendered for,” he said. “We avoided all the longer-term debt and just bought the OpCo debt in the low 80 [cents] that are worth high 90s now, just a few days later.”

Marathon, which specializes in purchasing distressed debt, is also among the hedge funds scooping up Credit Suisse’s AT1 bonds, which are now trading as claims, according to Bloomberg.

Holders of the risky AT1 notes—which act as buffers in the case of a bank’s liquidity levels falling below a certain level—were left furious when regulators made the controversial decision to write down $17.3 billion in Credit Suisse AT1s in favor of preserving $3.3 billion in value for shareholders as part of the UBS takeover.

Typically, bondholders are prioritized over shareholders when it comes to getting their capital back when a bank faces collapse. However, in Switzerland, the financial regulator is not compelled to comply with those conventions.

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