CREDIT Suisse Group said it has paid US$210 million to Georgian billionaire Bidzina Ivanishvili to date, as part of a long-running legal saga. At the same time, the Swiss bank is exiting distressed debt and special-situations trading, as part of its broader exit from risky and capital-intensive businesses.

A spokesperson for the lender said in a statement that it paid the sum “over time, for the proceedings across all the plaintiff’s accounts”. No figures were specified for an ongoing trial in Singapore.

The statement is the most detailed admission to date of how much the legal wrangling has cost Credit Suisse globally. It emerged amid closing arguments at a two-day hearing in Singapore, which will mark the end of a trial that began in September 2022.

Ivanishvili was among those affected in a fraudulent scheme by former Credit Suisse banker Patrice Lescraudon. In 2018, Lescraudon was convicted in relation to the scheme, where he took money from Ivanishvili’s accounts to cover growing losses among other clients’ portfolios.

The Georgian tycoon subsequently sued the bank’s trust unit for US$800 million in damages and lost income, which he said he would have made over the years if his money had been safely invested.

Lee Eng Beng, a lawyer for the trust, said on Thursday (Feb 16) that Credit Suisse agreed to compensate Ivanishvili for failing to “police the perimeter” of his wealth from theft by Lescaudron. 

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There is “a duty to compensate for that loss”, Lee said in his closing arguments, as he sought to limit any broader fallout. “The duty does not extend to any liability for any losses from investment activity in relation to the assets managed in the trust account,” he added.

The stakes for the Singapore trial are high. In March 2022, Ivanishvili won a US$607 million judgment from a Bermuda court, which ruled that a local Credit Suisse life insurance unit there had turned a “blind eye” to Lescaudron’s fraud. The unit, CS Life, is appealing that decision.

Separate negotiations between the two sides appear to have stalled, according to a statement that the former Georgian prime minister put out in late January. The bank had initiated discussions, but those were now little more than an “illusion of negotiations”, said the release.

Representatives for Credit Suisse and Ivanishvili declined to comment ahead of the hearing.

Separately, sources said that the bank is selling a book of assets, including bond and loan positions related to distressed companies, with a market value of about US$250 million. The portfolio was put up for sale in December 2022, and final commitments from bidders are due this week.

The sources asked not to be named as the information is private.

The Swiss lender is in the early stages of a costly restructuring that includes cutting 9,000 jobs and carving out large parts of the investment bank under the revived First Boston brand. As part of the revamp, the bank has created a “non-core unit” that houses assets which it plans to liquidate because they do not have ties to the key wealth-management business or fit into the investment-bank strategy.

A spokesperson for Credit Suisse declined to comment on the sale.

The bank’s special situations and loan trading team, headed by Thomas Mathieson, could also be transferred to any firm that buys the assets, some of the sources said. No formal agreements on hiring have been made yet.

The portfolio, which has as many as 30 trading positions, includes a revolving credit facility of struggling auto-parts maker Standard Profil Automotive, which has an interest rate of 14 per cent. Other positions include claims on Thomas Cook, which collapsed in 2019.

Exiting the distressed debt business, in which Credit Suisse was once one of the biggest players, will allow it to allocate capital elsewhere instead of the relatively higher amounts needed to back the riskier activity. In the strategy update announced in October 2022, the bank said it would also seek to reduce the leverage exposure in fixed-income trading by US$20 billion.

Last week, the bank said it was expecting an US$800 million gain in the first quarter of 2023, from the sale of its securitised products group to Apollo Global Management. A US$4 billion share sale late last year and other measures have helped bolster the bank’s key capital ratio to 14.1 per cent. The SPG sale to Apollo will likely add another 30 basis points in the first quarter. BLOOMBERG