GIC Makes Big Mistake With UBS

0 comments   Friday, July 25, 2008

Singapore Investment Arm To Sink Billions Into UBS

The Swiss bank is raising a total of 13 billion Swiss francs ($11.48 billion) in fresh capital from two investors. The Government of Singapore Investment Corp., which invests the city-state’s foreign-exchange reserves, will contribute 11 billion Swiss francs ($9.75 billion); the other investor was not identified, but was said by Reuters to be the government of Oman, which has been attempting to diversify its economy away from reliance on oil production.

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UBS hit with New York auction-rate security suit

N.Y. State AG Andrew Cuomo files civil suit against Swiss banking giant for falsely marketing and selling investment to retail investors.

NEW YORK (CNNMoney.com) -- New York State Attorney General Andrew Cuomo Thursday brought a multi-billion dollar civil lawsuit against the Swiss banking giant UBS for allegedly pushing everyday investors into buying troubled auction-rate securities.

The lawsuit charges UBS (UBS) with falsely marketing and selling auction-rate securities as safe, cash-equivalent investments at a time when the market for these securities was under severe strain.

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Investment by sovereign wealth funds has also emerged as a counterbalance to global private equity funds, particularly welcomed by companies whose owners insist on retaining control. GIC, for its part, told reporters in Singapore Tuesday afternoon that it is not seeking management control at UBS.

GIC’s deal with UBS is larger than the $7.5 billion investment the Abu Dhabi Investment Authority agreed to make in Citigroup (nyse: C - news - people ) on Nov. 26. Depending on the eventual conversion price, GIC would get about a 9% stake in UBS.

Last year, another Singaporean state investment agency, Temasek Holdings, agreed to spend about 2.2 billion pounds to buy an 11.55% stake in Standard Chartered Bank held by the Singapore-based Khoo family, becoming its largest shareholder.

Throughout its 26-year history, GIC has been headed by Singapore’s founder Lee Kuan Yew, who now holds the official title of “minister mentor,” as chairman of the board. It recently appointed as group managing director Lim Siong Guan, a career bureaucrat who doubles as chairman of the country’s Economic Development Board. Lim succeeded Lee Ek Tieng in September, after Lee retired from managing the company’s investments for 18 years.

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UBS Under-Promises, Under-Delivers

LONDON - It was even worse than UBS had warned.

The Swiss bank spent most of October warning investors of an impending third-quarter loss of between 600 million and 800 million Swiss francs ($516.8 million-$689.0 million), but when the precise figure of 726 million Swiss francs ($625.3 million) finally hit on Tuesday it still managed to top gloomy expectations.

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UBS first issued a profit warning in early October, blaming investments in the beleaguered American asset-backed securities market. Its losses are mirrored by U.S. counterparts like Merrill Lynch (nyse: ML - news - people ), which lost its chief executive on Tuesday following a $2.3 billion loss for the third quarter, which was tied to an $8.4 billion writedown.

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