Credit Suisse investors greenlight $4.2 billion capital raise

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Swiss pension fund foundation CEO says he's 'not convinced' by Credit Suisse restructure

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The logo design of Swiss bank Credit Suisse is seen at its head office in Zurich, Switzerland March 24, 2021.

Arnd Wiegmann|Reuters

Credit Suisse investors on Wednesday authorized a 4 billion Swiss franc ($ 4.2 billion) capital raise focused on funding the embattled loan provider’s huge tactical overhaul.

Credit Suisse’s capital raising strategies are divided into 2 parts. The initially, which was backed by 92% of investors, grants shares to brand-new financiers consisting of the Saudi National Bank through a personal positioning. The brand-new share offering will see the SNB take a 9.9% stake in Credit Suisse, making it the bank’s biggest investor.

SNB Chairman Ammar AlKhudairy informed CNBC in late October that the stake in Credit Suisse had actually been gotten at “floor price” and advised the Swiss loan provider “not to blink” on its extreme restructuring strategies.

The 2nd capital boost concerns recently signed up show pre-emptive rights to existing investors, and passed with 98% of the vote.

Credit Suisse Chairman Axel Lehmann stated the vote marked an “important step” in the structure of “the new Credit Suisse.”

“This vote confirms confidence in the strategy, as we presented it in October, and we are fully focused on delivering our strategic priorities to lay the foundation for future profitable growth,” Lehmann stated.

Credit Suisse on Wednesday forecasted a 1.5 billion Swiss franc ($ 1.6 billion) loss for the 4th quarter as it starts its 2nd tactical overhaul in less than a year, focused on streamlining its company design to concentrate on its wealth management department and Swiss domestic market.

The restructuring strategies consist of the sale of part of the bank’s securitized items group (SPG) to U.S. financial investment homes PIMCO and Apollo Global Management, in addition to a downsizing of its having a hard time financial investment bank through a spin-off of the capital markets and advisory system, which will be rebranded as CS First Boston.

The multi-year change intends to move billions of dollars of risk-weighted possessions from the constantly underperforming financial investment bank to the wealth management and domestic departments, and to minimize the group’s expense base by 2.5 billion, or 15%, by 2025.

‘Too huge to stop working’ however more openness required

Vincent Kaufman, CEO of the Ethos Foundation, which represents numerous Swiss pension funds that are active investors in Credit Suisse, voiced dissatisfaction ahead of Wednesday’s vote that the group was no longer thinking about a partial IPO of the Swiss domestic bank, which he stated would have “sent a stronger message to the market.”

Despite the dilution of shares, Kaufman stated the Ethos Foundation would support the issuance of brand-new shares to existing investors as part of the capital raise, however opposed the personal positioning for brand-new financiers, mainly the SNB.

“The capital increase without pre-emptive rights in favor of new investors exceed our dilution limits set in our voting guidelines. I discussed with several of our members, and they all agree that the dilution there is too high,” he stated.

“We do favor the part of the capital increase with preemptive rights, still believing that the potential partial IPO of the Swiss division would have also been a possibility to raise capital without having to dilute at such a level existing shareholders, so we are not favoring this first part of the capital increase without pre-emptive rights.”

At Credit Suisse’s yearly basic conference in April, the Ethos Foundation tabled an investor resolution on environment technique, and Kaufman stated he was worried about the instructions this would take under the bank’s brand-new significant investors.

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“Credit Suisse remains one of the largest lenders to the fossil fuel industry, we want the bank to reduce its exposure, so I’m not sure this new shareholder will favor such a strategy. I’m a little bit afraid that our message for a more sustainable bank will be diluted among these new shareholders,” he stated.

Wednesday’s conference was not relayed, and Kaufman berated the Credit Suisse board for proposing a capital raise and going into in brand-new external financiers “without considering existing shareholders” or welcoming them to the conference.

He likewise raised concerns about “conflict of interest” amongst board members, with board member Blythe Masters likewise working as a specialist to Apollo Global Management, which is purchasing a part of Credit Suisse’s SPG, and board member Michael Klein slated to direct the brand-new dealmaking and advisory system, CS FirstBoston Klein will step down from the board to release the brand-new company.

“If you want to restore trust, you need to do it clean and that’s why we’re still not convinced. Again, a stronger message with an IPO of the Swiss domestic bank would have reassured at least the pension funds that we are advising,” he stated.

However, Kaufman worried that he was not worried about Credit Suisse’s long-lasting practicality, classifying it as “too big to fail” and highlighting the bank’s strong capital buffers and diminishing outflows.

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