Swiss court overturns the 2023 decision that erased $17 billion in Credit Suisse AT1 bonds

A Swiss court has ripped open a case many thought was buried. The Federal Administrative Court just overturned the 2023 order that wiped out $17 billion worth of Additional Tier 1 (AT1) bonds tied to Credit Suisse, according to Bloomberg.

These were the same bonds investors were told were worth zero when UBS Group AG was pushed to take over the failing bank in a government-brokered deal. That decision had left bondholders blindsided and furious. Now? They’re back in the fight, and they want their money.

The ruling, which came down this week, doesn’t mean investors will immediately be repaid. But it cancels the core decision that vaporized the bonds in the first place. And while Switzerland’s financial regulator, Finma, has already said it will challenge the court’s decision, the ruling has cracked open a new legal path that investors are ready to walk. Some of them are now pointing to Lehman Brothers as a possible playbook for how this all ends—with a payout.

Investors push Lehman comparison as prices jump

The Lehman comparison isn’t accidental. After the 2008 crash, creditors of Lehman Brothers International Europe, the London branch, were repaid in full, with interest, after sitting on crushed claims for years. That result has become the holy grail for distressed bondholders.

Two people holding claims linked to Credit Suisse’s wiped AT1s said they’re hoping for something just like that. They refused to be identified since they’re not cleared to speak publicly, but their message is loud: they’re in it for the long haul.

Since the takeover, these AT1 bonds have been stripped of their classification as securities. That means no coupons, no investor protections, no legal borrower obligations. Just claims. Nothing more. For more than two years, holders have watched their position sit dead on paper. But Tuesday’s court decision has changed the tone.

Traders operating in a niche secondary market saw the value of these claims rise fast, from 12 cents to around 30 cents on the dollar. That’s not recovery, but it’s no longer dead weight.

Romain Miginiac, head of research at Atlanticomnium, said his firm, which was exposed to the bonds, is running the numbers on how this could play out. “The case remains uncertain and complex,” Romain said. “If bondholders do end up being compensated, the amount is also uncertain.” He said investors are modeling everything from full recovery with interest, to something closer to what Credit Suisse shareholders received: 3 billion Swiss francs, or about $3.75 billion.

Court ruling triggers legal momentum, but payout still far away

Some firms are already taking legal action. Natasha Harrison, managing partner at Pallas Partners, represents several bondholders. She called the court’s ruling a major moment.

“This ruling represents a crucial step toward ending a prolonged period of uncertainty for our clients, who have waited far too long for justice,” Natasha said. “By finding that the so-called ‘viability event’ never occurred and the writedown had no other legal basis, the Court has set the record straight.”

But that doesn’t mean bondholders can start counting cash. Finma said it would appeal. On top of that, the court still hasn’t issued a formal reversal of the original write-down order. So while the ruling tore down a legal wall, it didn’t rebuild anything in return. The money’s still stuck in limbo.

Even Lehman investors had to wait. In that case, creditors tied to the European arm weren’t repaid until more than a decade after the New York-based bank collapsed. That’s the timeline people are preparing for here too. A legal marathon, not a sprint.

Miginiac added one last warning: “It’s a very positive first step but definitely not a done deal.”

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