UPDATE: UBS Shareholders Approve $12 Billion Capital Injection

March 05, 2008, 10:19 p.m. EST 2 Min Read

LONDON (Dow Jones) -- Plans to raise around $12 billion in fresh capital atUBS were given the green light Wednesday after Chairman Marcel Ospel urgedshareholders to take a "level-headed" look at the proposals and argued they wereessential to help it tackle the credit crisis.

Ospel -- who has come under pressure to resign for allowing the bank to buildup massive exposures to U.S. mortgages -- also vowed to remain in his post andhelp return the bank to profitability.

"I would never thoughtlessly relinquish my responsibility, and I intend toensure that UBS gets back on the road to success," Ospel said in a speech toshareholders.

"I believe it is my supreme duty to be there on the front lines, helping thebank tackle and overcome its current troubles," he added.

UBS (UBS) said shareholders eventually voted to approve the capital injectionfrom the Singapore government and an unnamed Middle East investor. The deal isstructured as a convertible bond that will pay an interest rate of 9% for up totwo years.

Shareholders also approved the bank's plan to pay its dividend in stock,rather than cash, and voted down a proposal from activist investors Ethos tocommission a special audit of the bank's subprime mortgage holdings.

While the meeting gave shareholders the chance to vent their anger at UBS'losses, the approval had been broadly expected.

The main argument against the deal came from Swiss pension fund Profond andother shareholders who wanted a chance to participate in the fund raising.Profond has argued that the plans unfairly favor the two new investors and willdilute value for existing shareholders.

Shares in UBS rose 1.6% in New York after the vote. The stock has fallen morethan 50% from its peak in the summer as UBS has gradually revealed its positionas the worst hit European bank in the credit crisis.

In its latest update earlier in February, the bank revealed around 88 billionSwiss francs ( $81 billion) of net exposure to risky U.S. mortgages, even aftertaking some $14 billion in write-downs in the fourth quarter.

More write-downs expected

Ospel on Wednesday dismissed claims that UBS had taken a piecemeal approach todisclosing its position as "utter nonsense." He said the bank has alwaysprovided information as soon as possible, but has had to continually adjust itsviews as mortgage markets have deteriorated.

The bank is widely expected to take further write-downs in the first half of2008 on its remaining exposure to subprime mortgages and other risky assets.However, Ospel didn't use Wednesday's meeting to confirm that more losses wereon the way -- as some analysts had been expecting.

Instead he urged shareholders to look past the current problems, byhighlighting that other divisions such as wealth management still reportedrecord results for the year.

"There is no doubt that we have judged a number of developments wrongly," saidOspel. "This is extremely painful, but nothing can be done to change it."