UBS Shareholders Oppose Investment

UBS is getting heat on multiple front on the planned investment of $11.5 billion, the bulk of which comes from the Singapore Investment Corporation, and the remainder from a secretive Middle Eastern investor. Initially, this development seemed like a coup, for the Swiss bank announced further writeoffs seen as deep enough to take it through the credit crisis ($10 billion at the same time it presented a remedy for its errors.

That tidy plan is unravelling. Yesterday, shareholder advocates (and $52 million shareholder) Ethos called for more disclosure on UBS’ writedowns, and threatened to demand an independent probe if its questions went unanswered.

The Financial Times reports today that another institutional investor has urged shareholders to reject the recapitalization. The FT further reveals that the Middle Eastern investor, who had insisted on anonymity, was a member of the Saudi royal family:

….the Financial Times learned that the mystery Middle Eastern investor ploughing SFr2bn ($1.73bn) into UBS’s recapitalisation is from Saudi Arabia. “It’s a reasonable assumption the ruling family was involved and approved [the deal],” said one figure with knowledge of the negotiations.

Details of the Saudi royal family’s involvement were unclear but one banker believed Prince Sultan, the crown prince and defence minister, was a leading figure 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 bank looks certain to have a raucous shareholders’ meeting in February, when the investment is scheduled to be approved.

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