On March 10, 2017, UBS updated its Senior Debt Programme ("Programme"), under which bail-inable (TLAC) notes may from time to time be issued that are fully and unconditionally guaranteed by UBS Group AG ("UBSG"). The update included a change in issuer under the Programme, from a Jersey SPV to a Swiss SPV (UBS Group Funding (Switzerland) AG) that qualifies as a "relevant group company" pursuant to art. 2bis of the Swiss Banking Act. The Programme is a global programme allowing for the offering of bail-inable (TLAC) notes both in the U.S. in reliance on Rule 144A under the U.S. Securities Act ("Rule 144A"), as well as outside of the U.S. in reliance on Regulation S under the U.S. Securities Act ("Regulation S").

Furthermore, on March 23 and March 20, 2017, UBS completed its inaugural issuances of bail-inable (TLAC) notes by the Swiss SPV under the Programme, consisting of four tranches: three U.S. dollar-denominated tranches amounting to USD 5 bn in aggregate principal amount, and one EUR 1.75 bn tranche. The USD 1 bn Floating Rate Senior Notes due May 2023, the USD 2 bn 3.491 per cent. Senior Notes due May 2023 and the USD 2 bn 4.253 per cent. Senior Notes due March 2028 were offered in the U.S. in reliance on Rule 144A and outside of the U.S. in reliance on Regulation S, while the EUR 1.75 bn Floating Rate Senior Notes due September 2022 were offered outside the U.S. in reliance on Regulation S. All four tranches of notes will be listed on the SIX Swiss Exchange Ltd.

The Programme is registered as an issuance programme with the SIX Swiss Exchange, and notes issued thereunder ("Notes") are governed by Swiss law, eligible to count towards UBSG's Swiss gone concern requirement and exempted from the Swiss withholding tax regime. The Notes are designed to meet the criteria for so-called Total Loss Absorbency Capacity (TLAC) instruments proposed by the Financial Stability Board (FSB) and to allow the absorption of losses by the noteholders through a statutory full or partial conversion and|or write-down ordered by the Swiss Financial Market Supervisory Authority FINMA ("FINMA") in the course of restructuring proceedings with respect to UBSG.

As with UBS's previously issued bail-inable (TLAC) notes, the Notes contain contractual mechanics to (i) bring the Notes into the jurisdiction of the resolution powers of FINMA should restructuring proceedings be opened with respect to UBSG, so that FINMA may exercise its statutory resolution powers to write-down the Notes and|or convert them into equity of UBSG (i.e., an automatic issuer substitution feature), and (ii) safeguard the recognition of the exercise of such resolution powers by FINMA.

Structural subordination enables FINMA to fully or partially convert or write-down the Notes prior to the operating liabilities of the bank UBS AG. In view of the issuance of the Notes by a Swiss SPV, the issuer has been declared a "relevant group company" pursuant to art. 2bis of the Swiss Banking Act. This means that FINMA will be able to exercise its statutory resolution powers with respect to the Swiss SPV issuer as well as UBSG, allowing FINMA to take a comprehensive approach in a resolution scenario.

Homburger advised UBS in the structuring of the transaction and on all regulatory and transactional aspects as to Swiss law of the offer, the issuance and listing of the Notes.

The Homburger team included partners Benedikt Maurenbrecher, Stefan Kramer, Daniel Haeberli (all Financial Services) and Stefan Oesterhelt (Tax) as well as counsels Lee Saladino and Eduard De Zordi, associate Daniel Hulmann and junior associate Manuel Baschung (all Financial Services).