767-322ETOPS
Oct 8, 01, 7:56 am
By William Hall in Zurich
Published: October 7 2001 20:14 | Last Updated: October 8 2001 01:35
Bankers rarely admit mistakes, especially Swiss bankers.
But Marcel Ospel, chairman of UBS, Switzerland's biggest bank, swallowed his pride and went on Switzerland's national TV on Friday night and apologised for his bank's part in the handling of the crisis that led to last week's humiliating grounding of Swissair, Switzerland's national airline.
Mr Ospel, along with Lukas Muhlemann, chairman of rival Credit Suisse, has borne the brunt of the public outrage in Switzerland following last week's collapse of the 70-year-old Swissair.
Mario Corti, Swissair's respected chairman, has said that he was "deceived" by UBS and accused the bank of forcing the grounding of the Swissair fleet by turning off its liquidity.
Mr Ospel has admitted that his decision to fly to New York immediately after Swissair announced plans to file for bankruptcy had been a mistake.
Last week's near 50 per cent jump in the value of the shares of Crossair, Swissair's quoted regional airline that will take over the most profitable routes of the bankrupt Swissair, has incensed Swissair's foreign creditors.
However, UBS, in particular is more concerned about repairing the immediate damage to its reputation than any longer-term challenges to its rescue plan.
As the dust begins to settle after last week's spectacular collapse, it is becoming clear that UBS cannot be blamed solely for last week's temporary grounding of the Swissair fleet.
Bankers close to the deal suggest that Mr Corti, dubbed "Super Mario" by his admirers, was also partly responsible because of his dogged refusal to prepare in advance for a bankruptcy that many bankers felt inevitable after the events of September 11.
"Swissair could have either hit a brick wall or glided into the brick wall," said one bank adviser close to the negotiations which led to last week's bankruptcy.
The collapse in airline traffic after September 11, and the knock-on effect on the value of assets Swissair needed to sell to raise its liquidity, meant that Swissair could not survive under its burden of SFr15bn ($9.3bn) of debts and wafer-thin equity.
If Mr Corti had accepted this earlier, last week's chaotic grounding of the entire Swissair fleet could have been avoided, believes one banker.
UBS, stung by accusations that it pulled the plug on Swissair at the last moment, notes that as far back as March 31 it had warned Swissair could not survive without a restructuring. Mr Ospel, Alberto Togni, a UBS vice-chairman, and Jurg Haller, Swissair's main UBS contact, gave Mr Corti the grim conclusion shortly after he arrived from Nestle to rescue Switzerland's proudest corporate symbol.
Mr Corti refused to accept that Swissair's financial position was as dire as UBS's analysis suggested and went ahead and arranged a SFr1bn standby credit line from Credit Suisse, Deutsche Bank and Citibank, in a bid to prove that Swissair's main lenders still had confidence in Swissair.
UBS, which pointedly refused to participate in the facility, says that Swissair could never have used the money because it was not able to meet the conditions.
It was the first of a series of occasions when UBS believes that Mr Corti refused to accept the inevitable. On September 10, Swissair issued a press release denying that it was facing liquidity problems and stating that it was "in full compliance with all covenants relating to its borrowings".
However, that was the day that UBS, which managed Swissair's day-to-day liquidity, informed the airline that it was no longer willing to accept the large intra-day settlement risks because of Swissair's deteriorating financial condition. Four days later it gave Swissair notice that it planned to terminate its cash management activities at the end of October.
UBS continued to manage Swissair's liquidity but was seeking prior approval before large payments were made. It insists that there was still liquidity available when Swissair decided to ground its fleet.
"We cannot understand why it took place in such an unco-ordinated fashion," said one UBS banker. Nevertheless, there is a suspicion in some banking circles that Mr Corti grounded the fleet to exact the SFr450m cash injection from the Swiss government that allowed the airline to limp back into the air.
Whatever the truth, UBS and Credit Suisse can take some comfort from a poll in yesterday's SonntagsBlick newspaper, which showed that 71 per cent of Swiss blamed Swissair's management for the bankruptcy. Only 20 per cent blamed the banks.
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Who is John Galt?
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Published: October 7 2001 20:14 | Last Updated: October 8 2001 01:35
Bankers rarely admit mistakes, especially Swiss bankers.
But Marcel Ospel, chairman of UBS, Switzerland's biggest bank, swallowed his pride and went on Switzerland's national TV on Friday night and apologised for his bank's part in the handling of the crisis that led to last week's humiliating grounding of Swissair, Switzerland's national airline.
Mr Ospel, along with Lukas Muhlemann, chairman of rival Credit Suisse, has borne the brunt of the public outrage in Switzerland following last week's collapse of the 70-year-old Swissair.
Mario Corti, Swissair's respected chairman, has said that he was "deceived" by UBS and accused the bank of forcing the grounding of the Swissair fleet by turning off its liquidity.
Mr Ospel has admitted that his decision to fly to New York immediately after Swissair announced plans to file for bankruptcy had been a mistake.
Last week's near 50 per cent jump in the value of the shares of Crossair, Swissair's quoted regional airline that will take over the most profitable routes of the bankrupt Swissair, has incensed Swissair's foreign creditors.
However, UBS, in particular is more concerned about repairing the immediate damage to its reputation than any longer-term challenges to its rescue plan.
As the dust begins to settle after last week's spectacular collapse, it is becoming clear that UBS cannot be blamed solely for last week's temporary grounding of the Swissair fleet.
Bankers close to the deal suggest that Mr Corti, dubbed "Super Mario" by his admirers, was also partly responsible because of his dogged refusal to prepare in advance for a bankruptcy that many bankers felt inevitable after the events of September 11.
"Swissair could have either hit a brick wall or glided into the brick wall," said one bank adviser close to the negotiations which led to last week's bankruptcy.
The collapse in airline traffic after September 11, and the knock-on effect on the value of assets Swissair needed to sell to raise its liquidity, meant that Swissair could not survive under its burden of SFr15bn ($9.3bn) of debts and wafer-thin equity.
If Mr Corti had accepted this earlier, last week's chaotic grounding of the entire Swissair fleet could have been avoided, believes one banker.
UBS, stung by accusations that it pulled the plug on Swissair at the last moment, notes that as far back as March 31 it had warned Swissair could not survive without a restructuring. Mr Ospel, Alberto Togni, a UBS vice-chairman, and Jurg Haller, Swissair's main UBS contact, gave Mr Corti the grim conclusion shortly after he arrived from Nestle to rescue Switzerland's proudest corporate symbol.
Mr Corti refused to accept that Swissair's financial position was as dire as UBS's analysis suggested and went ahead and arranged a SFr1bn standby credit line from Credit Suisse, Deutsche Bank and Citibank, in a bid to prove that Swissair's main lenders still had confidence in Swissair.
UBS, which pointedly refused to participate in the facility, says that Swissair could never have used the money because it was not able to meet the conditions.
It was the first of a series of occasions when UBS believes that Mr Corti refused to accept the inevitable. On September 10, Swissair issued a press release denying that it was facing liquidity problems and stating that it was "in full compliance with all covenants relating to its borrowings".
However, that was the day that UBS, which managed Swissair's day-to-day liquidity, informed the airline that it was no longer willing to accept the large intra-day settlement risks because of Swissair's deteriorating financial condition. Four days later it gave Swissair notice that it planned to terminate its cash management activities at the end of October.
UBS continued to manage Swissair's liquidity but was seeking prior approval before large payments were made. It insists that there was still liquidity available when Swissair decided to ground its fleet.
"We cannot understand why it took place in such an unco-ordinated fashion," said one UBS banker. Nevertheless, there is a suspicion in some banking circles that Mr Corti grounded the fleet to exact the SFr450m cash injection from the Swiss government that allowed the airline to limp back into the air.
Whatever the truth, UBS and Credit Suisse can take some comfort from a poll in yesterday's SonntagsBlick newspaper, which showed that 71 per cent of Swiss blamed Swissair's management for the bankruptcy. Only 20 per cent blamed the banks.
------------------
Who is John Galt?
------------------