UBS Warns of Losses Tied to Real Estate

May 27 2008 - UBS AG warned it may have to record losses on non-U.S. real estate as it seeks nearly $16 billion from shareholders to repair a dented balance sheet.

In a prospectus for a share sale, UBS said economic and market conditions were volatile and challenging into the second quarter.

The Swiss bank last week said it plans to sell $22 billion of U.S. residential-mortgage-backed securities to BlackRock Inc. for $15 billion, with UBS providing an $11.25 billion loan to the fund manager in the process.

But as the subprime troubles cool down, others have heated up. UBS’s exposure to auction-rate securities, used mostly in municipal financing, increased to 11 billion Swiss francs ($10.7 billion) from six billion francs during the first quarter.

UBS said in the prospectus that its unprofitable positions in real-estate markets outside the U.S. “could increase.”

Altogether, UBS has taken about $19.2 billion in write-downs and losses for an $82.6 billion portfolio of securities tied mostly to the U.S. housing market.

Shares in UBS dropped 5.8% to 28.20 francs on the Swiss market and are down more than 60% over the past 12 months.

UBS Warns Of Losses Tied To Real Estate
by STEVE GOLDSTEIN | Wall Street Journal