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SINGAPORE : The Singapore government's investment arm announced Monday that it will inject almost US$10 billion into Swiss bank UBS.
The Government of Singapore Investment Corporation (GIC) said it would inject 11 billion Swiss francs (US$9.74 billion) into UBS, which on Monday announced further writedowns of around US$10 billion (6.8 billion euros) due to the US sub-prime mortgage crisis.
GIC said an undisclosed strategic investor in the Middle East is injecting an additional two billion francs into the bank.
"We made this significant investment in UBS because we have confidence in the long-term growth potential of the bank's businesses, particularly its global wealth management business," GIC's deputy chairman and executive director, Dr Tony Tan Keng Yam, told a news conference.
GIC has committed to subscribe to 11 billion Swiss francs worth of mandatory convertible notes that will pay a coupon of nine percent until conversion into ordinary shares about two years after issuance, UBS said.
Depending on the conversion price, Dr Tan said GIC's total shareholding "could amount to possibly around nine percent of UBS equity".
GIC currently has less than 1.1 percent of the bank's equity, he said.
"Nine percent is a large stake. I think we would be the single largest shareholder in UBS," Dr Tan added.
GIC executives said the move marked a departure for the firm, whose practice has been to take relatively small public equity stakes for portfolio diversification.
"It is a departure from the norm in the sense that it is a larger than usual stake but we made the decision based on our confidence in the long-term prospects of UBS," said Ng Kok Song, GIC managing director and group chief investment officer.
He and Dr Tan emphasised that GIC does not seek a say in management and said it would be premature to talk of GIC's obtaining a seat on the UBS board.
"We've got no desire to control the business of the bank but as a large investor, as a large long-term investor, we would like to work with the board of the bank, the chairman and the management to create maximum value for all shareholders," Ng said.
UBS, Switzerland's largest bank, in October reported its first quarterly loss in five years after its third-quarter results were hit in the financial crisis caused by the ailing US home loans market.
On Monday the bank said in Zurich that it has revised the assumptions and inputs used to value US sub-prime mortgage related positions, resulting in further writedowns of around US$10 billion.
UBS said it expected to post a fourth-quarter loss and may record a net loss for the full year 2007.
"I don't think that either UBS or any bank can say with absolute certainty that this is the last of the writedowns," Tan said.
But he added UBS "have taken a very aggressive writedown" and acted before the market develops problems.
"Our intention is to remain a responsible, supportive investor in UBS, hopefully for the long term," Tan said.
He added that UBS approached GIC about a possible deal, and then "at their own initiative" contacted the other investors whom he declined to identify.
GIC was established in 1981 to manage Singapore's foreign reserves and now manages "well above" US$100 billion, making it one of the world's largest fund management companies, its website says.
"The group strives to achieve good long-term returns on assets under our management, to preserve and enhance Singapore's reserves," it adds. - AFP/ch
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