CREDIT Suisse Group, the struggling Swiss bank, has invited at least 20 banks to join the syndicate for its US$4 billion rights issue that should help the lender finance another multi-year restructuring programme, according to people familiar with the plan.
The Swiss bank's new chief financial officer Dixit Joshi held a due diligence call for the capital increase - dubbed as project Ghana - with a group of FIG and ECM bankers on Friday evening after Credit Suisse's announcement of a new turnaround plan the day before, the people said. On top of the lead banks - Morgan Stanley (MS), Royal Bank of Canada (RBC), Deutsche Bank and Societe Generale (SocGen) - Credit Suisse invited another long list of lenders to help with the underwriting of newly issued shares.
Goldman Sachs Group, Citigroup, Wells Fargo & Co, JPMorgan Chase & Co, BNP Paribas, Natixis, Credit Agricole, Barclays, Banco Santander, ABN Amro, ING Groep and Commerzbank, Sumitomo, Mediobanca, Intesa Sanpaolo, UniCredit, Bank of America, BMO, BBVA, HSBC and Scotiabank are all being courted to join the consortium, according to people familiar with the matter.
All lenders either declined to comment on the details of the call and their involvement in the capital hike or didn't immediately reply to requests for comment. Credit Suisse declined to comment. MS, RBC, Deutsche Bank and SocGen had been announced as the lead banks on Thursday (Oct 27). Some lenders may decide against participating in the rights issue however it is fully underwritten, the people said.
The bank is seeking to raise 4 billion francs (S$5.7 billion) and the Saudi National Bank has already committed to roughly a third of the offer, becoming a big shareholder in the bank.
Credit Suisse, which today has roughly the same market capitalisation as much smaller cross-town rival Julius Baer Group, announced a radical restructuring programme on Thursday which basically marks a major retreat from investment banking for Switzerland's number two lender.
While the announcement included major strategic shifts, it disappointed investors who remain concerned about the execution risks of the restructuring as well as a deterioration of profits in the banks core business of wealth and asset management. Shares of the bank fell further, dropping below 4 francs to a historic low giving it a market price of 10.4 billion francs.
The number of banks is high for a capital increase of a relatively small size. Participating in rights issues of banks is widely seen as a lucrative mandate for investment banks as they seek to move up in league tables. For financial institutions giving mandates to each other for strategic initiatives such as deals or rights issues is also a tool used to manage relationships.
Financial institutions are intertwined and work together on a daily basis from interbank lending to cash management to bond issuance and custodial services. The risk to signing up to a capital raise is a crash in a company's share price. If the underwriter doesn't manage to sell off the shares, they will end up on its own books. BLOOMBERG