Singapore’s GIC not ruling out fresh cash injection into UBS

Pearl Bantillo
Thomson Financial News

The Government of Singapore Investment Corp. (GIC), a sovereign wealth fund, is not ruling out a fresh cash injection into UBS AG after the Swiss financial giant announced a plan to raise another $15 billion in capital through the issuance of new shares, the Business Times reported on Wednesday.

‘We will examine the terms of the rights issue and obtain other necessary information before we decide,’ the newspaper quoted GIC as saying.

The newspaper said that GIC is sticking with its $11 billion investment in UBS despite the bank’s second quarterly loss because of huge subprime-related writedowns.

UBS said Tuesday it will incur a net loss of about 12 billion Swiss francs because of another $19 billion writedown on U.S. real estate and related structured credit positions in the first quarter. The new subprime hit brings UBS’ total writedowns to more than $40 billion.

GIC also brushed aside concerns that its stake in UBS, once the investments are converted into equity in two years, will be diluted with the new rights issue.

‘The dilution to shareholders as well as to holders of mandatory convertible notes is a necessary step in the long-term interests of the bank,’ GIC said.

The Business Times said that GIC will be able to renegotiate the terms of its initial investment in UBS.

Under the terms of the bonds, the maximum conversion price for the shares may be lowered if the bank sells more than 5 billion Swiss francs worth of new shares or equity-linked securities at lower prices or with a higher interest payment within one year of the investment.

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