UBS to buy back $19.4 billion of ARS

UBS AG has agreed to buy back $19.4 billion in auction rate securities on which the value collapsed in February, during the global credit crunch. In a deal with federal and state regulators, UBS agreed to repurchase the securities from retail and institutional clients. The agreement comes a day after the Securities and Exchange Commission announced a preliminary settlement with New York-based Citigroup Inc. to immediately buy back, at par value, the $7.5 billion in auction rate securities it sold to investors (InvestmentNews Aug. 7). UBS agreed to pay Massachusetts $750,000 on July 31, after the state sued the Zurich, Switzerland-based company on behalf of municipalities affected by the sale of the auction rate securities (InvestmentNews July 31). UBS also faces lawsuits from New York and Texas over the sale of auction rate securities, which are debt instruments on which interest rates are periodically reset through monthly auctions A UBS spokesman declined to discuss the settlement but said in a statement, “We are consistently working with regulators toward a comprehensive solution for all ARS investors.”