Credit Suisse CS 13.05% Group AG has in recent days intensified efforts to sell or downsize stakes in key companies as part of a planned restructuring at the bank, people familiar with the matter said.
Around 10 bidders have submitted bids for the bank’s securitized product line, some of the people said. The Swiss bank floated the deal, one of its most profitable, in July and said it wanted to find an outside investor to save capital.
Bidders include Sixth Street Partners, which hired one of the group’s lead bankers earlier this year to help build a similar business, according to some of the people. Other bidders include buyout firm Centerbridge Partners and Apollo Global Management.
Credit Suisse has come under a lot of pressure over the past few days because of its plans. The bank’s stock and debt plummeted last week, a selloff accelerated by an online frenzy over its health.
Shares rallied this week, gaining again on Friday after the bank announced a surprise buyback of its $3 billion senior notes, which are trading at a discount to par. The move was seen by investors as a show of financial power and a way for the bank to capitalize on its troubles.
“They are giving a signal that they are not in financial distress,” said Artaud Caloni, portfolio manager focused on bank bonds at Meeschaert Amilton Asset Management.
The sale of the group of securitized products, bond buybacks and a long list of other measures are in preparation for a strategy update on October 27, when Credit Suisse executives have promised to present a new plan on how the bank is on course can be brought on a sustainable path after years of glitches and bumpy performance. It suffered more than $5 billion in damage in 2021 due to the implosion of client Archegos Capital Management.
Credit Suisse has said it needs to become safer and leaner by divesting parts of its investment bank and focusing on its core business of wealth management for wealthy clients.
Analysts say about $5 billion in fresh capital may be needed to restructure and stabilize, but some of that could be offset by divestitures. Many of the strategies pursued, including asset sales, face treacherous market conditions and could still fall apart.
Regarding the other measures that Credit Suisse is pursuing:
•The bank is in informal discussions with existing and new investors about opportunities to increase its capital through billions of dollars in new investments, people with knowledge of the matter said. The bank has not initiated any official process to raise new shares, the people added. Portal previously reported talks with investors about raising fresh money.
•Credit Suisse is considering proposals for select parts of its wealth management business, some of those familiar with the matter said.
•Another option is to bring in an investor to help fund a slimmed-down investment banking division, provide deal-making advice and help companies raise stocks and bonds, according to people familiar with the plans. Bloomberg News had previously reported on the possibility.
•The bank is exiting more than two dozen non-core asset markets separately, the Wall Street Journal previously reported. Some remaining trades and long-term derivatives portfolios will go into a strategic wind-down entity, also dubbed a bad bank by some in the industry, according to people familiar with the plans.
•On Thursday, the bank announced that it had put up for sale a hotel it owned in Zurich, the Savoy. It could fetch hundreds of millions of dollars, according to one of the people familiar with the plans.
The most advanced process is a deal involving the group of securitized products. Initial offers for the group ranged from paying a nominal amount for the company to assuming its gross credit exposure of approximately 75 billion.
Some bidders have offered to buy all of the assets and full teams, while others have offered to buy a portion of the assets, one of the people said.
The group, which underwrites structured securities and packages mortgage bonds and other securities for resale, generates high returns but accounts for a large portion of Credit Suisse’s total capital buffer. Executives say there isn’t enough overlap with its wealth management business to justify its size.
This entity accounted for approximately $20 billion of Credit Suisse’s $278 billion in risk-weighted assets at the end of the second quarter. The full divestment could allow the company to raise around $2 billion
Some US and European banks have similar structured financing platforms that issue asset-backed securities to investors on behalf of companies and augment their own financing. Private equity firms and other credit professionals have gotten into the business in recent years.
Sixth Street is the former credit arm of TPG. It was formed in 2009 by 10 partners, many of whom worked together under Chief Executive Alan Waxman in Goldman Sachs Group Inc.’s special situations group. Assets under management are $60 billion.
In March, Sixth Street hired Michael Dryden, former head of treasury for securitized products at Credit Suisse, to establish a structured products arm.
—Laura Cooper, Emily Glazer, and Anna Hirtenstein contributed to this article.
write to Margot Patrick at [email protected], Ben Dummett at [email protected], and Julie Steinberg at [email protected]
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