SWITZERLAND - Swiss bank UBS has angered smaller shareholders by planning an exclusive capital increase with the help of two Asian institutional investors.

UBS plans to issue mandatory convertible notes (MCN) worth CHF13bn (€8bn), following severe losses in the wake of the US sub-prime crisis.

The firm has announced the Government of Singapore Investment Corporation (GIC) has agreed to subscribe for CHF11bn while "an investor from the Middle East" will contribute another CHF2bn.

In a statement the bank noted it had "considered undertaking a rights issue, but rejected this on the grounds of cost, complication and time".

"In current market conditions, this would in our judgement have allowed too many uncertainties to remain, put UBS's reputation at risk, and left the share price exposed to speculation."

However, many shareholder have criticised this plan and demanded to be included in the capital increase.

Among them is CHF1.8bn Swiss multi-employer Pensionskasse Profond which issued a statement demanding the equal treatment of all shareholders.

Asset manager Ethos is also hoping for a change of direction at UBS and is confident it will be achieved as the bank will need a two-thirds majority for its suggestions at the extraordinary general meeting on February 27.

The company specialising in sustainable investments noted GIC's commitment would leave it with a 10% stake and a controlling stake in UBS.

Ethos also announced in December it will question the losses made by the bank in detail at the meeting (See earlier IPE story: UBS under pressure over subprime losses).