UBS sells troubled assets

BlackRock一led fund pays cut一rate price as bank reduces risk lateralized term loan of $11.25 billion with which to buy the securities. The distressed asset fund is also paying $3.75 billion in equity

By MARTIN GELNAR
ZURICH-UBS AG said Wednesday that it has completed the sale of troubled mortgage-backed securities to a distressed-asset fund at a discount, indicative of the Swiss bank's efforts to reduce risky positions.

Zurich-based UBS said it sold assets of the subprime and Alt-A category with a nominal value of $22 billion for about $15 billion to a special investment vehicle led by U.S. fund BlackRock Inc., 49% owned by Merrill Lynch & Co.

As part of the deal, UBS is providing BlackRock with a multiyear colraised by BlackRock. Given UBS's previous writedowns on that position, the divestment won't lead to further impairments.

UBS, among the global banks hit hardest by the credit crisis with more than $37 billion in subprime-related writedowns, announced the divestment earlier this year, along with other measures to scale down its investment-banking operations. That included 2,600 job cuts at UBS's investment-banking arm and changes in management.

"Risk reduction remains a critical part of our ongoing financial restructuring, and this sale is a b论 step toward further reducing our positions in this asset class," UBS Chief Executive Marcel Rohner said.

A UBS spokeswoman said the deal is advantageous, citing the p盯back for the loan and a performance fee UBS will share with BlackRock. However, the equity investors in the deal will benefit most from any fee income, she added.

UBS-put on a stronger footing earlier this year with capital from a government of Singapore fund —and an unnamed Middle Eastern investor-plans to focus more on its lucrative wealth-management business, which is traditionally less prone to risk. However, its private bank has also suffered in the wake of the credit crisis.