UBS offloads subprime loans in $15bn deal

UBS today sold the bulk of its US subprime loans to fund manager BlackRock but had to fund 75% of the deal with its own lending.

BlackRock is paying $15billion (£7.7 million) for the largely subprime and Alt-A portfolio of assets which UBS said had a nominal value of $22billion. That is a much bigger discount than analysts had expected, with the bank selling the assets at only 68 cents in the dollar.

At the same time, UBS is providing three-quarters of the funding for BlackRock to complete the deal. BlackRock and its investors have put up $3.75billion in equity, with the Swiss bank providing $11.25 billion in long-term loans. By doing this, UBS shores up its regulatory capital ratios by shifting the loans off its balance sheet. But it remains exposed to some downside risk. The bank has so far written down $37billion of asset-backed securities mainly linked the subprime crisis.

Marcel Rohner, chief executive of the bank, said: "Risk reduction remains a critical part of ongoing financial restructuring and this sale is a big step towards further reducing our positions in this asset class. We continue to manage our legacy risks in a flexible and creative way in the best interests of our shareholders."

Speculation was mounting in Zurich that UBS would shortly publish the final terms of its Swfr15billion (£7.3 billion) rights issue, possibly as early as tomorrow.