Credit Suisse weighs convertible bond to help pay for overhaul
CREDIT Suisse Group is considering the issuance of convertible bonds or preferred shares among options to help pay for its overhaul and strengthen its balance sheet, people familiar with the matter said.
A convertible bond would allow the bank to potentially limit the sale of shares at depressed current prices after the stock lost about half its value this year. The Swiss firm used mandatory convertible notes to raise about US$2 billion to mend its balance sheet after the collapse of Archegos Capital Management in 2021.
After years of scandals and multibillion-dollar losses, investors are still seeking clues on what it will cost for chief executive officer Ulrich Koerner to restore confidence in the historic Swiss firm. Analysts have estimated the bank’s capital hole at US$4 billion to as much as US$9 billion over the coming years, though executives are working on asset sales to limit the need to raise money in the market.
A Credit Suisse spokesperson declined to comment. The people who described the money-raising options asked not to be identified as talks are private.
The Zurich-based bank is working with Royal Bank of Canada and Morgan Stanley on a potential capital increase, people familiar said earlier this week. Those discussions buttress efforts to dispose of some areas of the business, likely to include large parts of the investment bank, the securitised products unit and potentially asset management in the US.
The bank has already reached out to key shareholder the Qatar Investment Authority (QIA) to gauge the sovereign wealth fund’s interest in a potential capital injection, people familiar with the matter said earlier. Other Middle Eastern funds, such as Abu Dhabi’s Mubadala Investment and Saudi Arabia’s Public Investment Fund, are separately weighing whether to put money into Credit Suisse’s investment banking arm or other businesses, the people said.
Credit Suisse current troubles emanate at least in part from the collapse of Archegos, the family office of Bill Hwang, which cost the firm about US$5.5 billion. That made it the worst hit of the Wall Street banks. With analysts questioning the bank’s capital, it issued two series of mandatory convertible notes in the aftermath that translated to 203 million shares.
The first note was placed with a group of shareholders, including the QIA, and high-net-worth clients. That same group of investors pledged to backstop the issuance of the second note to remaining shareholders to ensure full takeup. The two notes converted into shares after 6 months. BLOOMBERG
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