ft.com/alphaville

More circularly-funded asset sales: we’re just hearing news that UBS has sold $22bn of Alt-A and subprime for 68 cents on the dollar, raising around $15bn.

UBS:

UBS announced today that it has closed on the sale of approximately USD $15 billion of primarily Subprime and Alt-A US residential mortgage-backed securities to a newly created distressed asset fund that will be managed by BlackRock, the global investment management firm.

Marcel Rohner, Group Chief Executive Officer of UBS said, “Risk reduction remains a critical part of our ongoing financial restructuring and this sale is a big step towards further reducing our positions in this asset class. We continue to manage our legacy risks in a flexible and creative way in the best interests of our shareholders.”UBS had, of course, already confirmed that such a sale was in the offing, but none of the details were disclosed. Not only are the securities being sold at a discount it seems, but UBS is also providing three quarters of the financing for Blackrock to actually buy them (emphasis ours):

UBS sold positions with a nominal value of approximately USD $22 billion to the new fund for an aggregate sale price of approximately USD $15 billion. Based on UBS categorizations, the vast majority of the positions are Subprime and Alt-A in roughly equal parts and the remainder is Prime. The fund purchased the securities using approximately USD $3.75 billion in equity raised by BlackRock from investors and a multi-year collateralized term loan of approximately USD $11.25 billion provided by UBS.

There was also talk doing the rounds that the bank is set to put terms on its forthcoming rights issue: the $15bn offer could be priced at between CHF17.50 - CHF20 a share, said some reports. Shares are currently trading at around CHF30.

Related links
HBOS, UBS and Sants - Robert Peston, BBC
Boots made for walking…in circles - FT Alphaville