The Business Times

Credit Suisse forced to pay junk-level yields for cash infusion

Published Thu, Nov 10, 2022 · 10:02 AM

REELING from a series of scandals and financial troubles, Credit Suisse Group is paying a massive price to drum up demand for bond sales on both sides of the Atlantic that will give it a much-needed injection of cash.

The embattled Swiss lender is marketing an 11-year fixed-to-floating-rate dollar bond at around 9 per cent - levels more consistent with where high-yield borrowers are currently trading, according to Bloomberg indexes.

Grappling with an existential crisis in its investment bank, Credit Suisse priced a euro obligation earlier with a stunning 7.75 per cent coupon - the second-highest ever for a new senior investment-grade bank deal in euros.

It’s a sign of how far the lender’s star has fallen as it undertakes sweeping job cuts, the sale of its securitised products group and a capital increase.

Attracting hefty demand thanks to the junk-level yields on offer, both bond sales are heavily oversubscribed. The bank received US$8 billion of orders for the US$2 billion pending sale in the US market, and 7.5 billion euros (S$10.5 billion) for the three billion euros 2029 bond in Europe, according to people familiar with the matter.

A Credit Suisse spokesperson declined to comment when contacted by Bloomberg.

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The sales underscore the bank’s declining creditworthiness and the surging cost of new funding as market yields jump. The lender’s long-term rating was downgraded by S&P Global Ratings to just one level above junk status last week, with the ratings agency citing “material execution risks”.

The average yield on a Bloomberg index of euro senior bank debt has risen to 4.3 per cent, up more than 13-fold since the start of the year, as central banks hike rates to fight runaway inflation.

Last week, many of Credit Suisse’s bondholders opted to hold on to discounted bonds issued by the Swiss lender in a buyback offer.

Sales on Wednesday (Nov 9) will complete the bank’s debt funding plans for the year and will count towards its total loss-absorbing capacity requirements, said Bloomberg Intelligence senior analyst Jeroen Julius. BLOOMBERG

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