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Friday, December 21, 2007


ubs facing shareholder revolt

via the financial times, it looks like the sovereign wealth put is going to be more complicated than some imagined, even as morgan joined the party and merrill apparently will, being invited by the government of singapore.

The FT has learned that the mystery Middle Eastern investor ploughing SFr2bn ($1.73bn) into UBS’s recapitalisation is from Saudi Arabia. Details of the Saudi royal family’s involvement were unclear but one banker said Prince Sultan, the crown prince and defence minister, was instrumental in the deal. The investment is understood to be the result of a long relationship between the private banking arm of UBS for the Middle East, headed by Michel Adjadj, and the Saudi royal family. The investor’s insistence on anonymity was among concerns raised by UBS shareholders on Thursday. One influential Swiss institutional investor urged shareholders to reject the proposal to raise SFr13bn from sovereign wealth funds. A second demanded a special audit of the bank’s losses. The danger of a revolt at the UBS special shareholders’ meeting in February to approve the measures prompted the Swiss National Bank to take the unusual step of recommending the recapitalisation.

there's something distinctly strange about seeing foreign governments repeatedly step where private investors fear to tread. are the governments taking good investment opportunities at depressed prices? or are they making questionable decisions that are illustrations of the agency problem of government? perhaps they feel that they have to take opportunities to purchase american hard assets where they can, having seen china in 2005 denied the right to purchase unocal with a helping hand of the xenophobic wing of the american media, thereby demonstrating that the ultimate return on investment for vendor financing may be even worse than expected.

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