Apollo Global Management and Pimco have partnered and are on the verge of acquiring Credit Suisse’s securitized product group as the Swiss bank prepares to significantly downsize its U.S. operations, according to people familiar with the talks.
The sale of the unit is expected to be announced at Credit Suisse’s strategy update on Thursday, the people added. The Swiss bank also plans to sell several other assets, including parts of its domestic bank, to fill a capital shortfall of around CHF 4.5 billion ($4.5 billion).
The New York-based securitized products business — which packages debt like mortgages and yacht loans before they’re resold as securities — would ease the capital burden on Credit Suisse’s balance sheet, but it would also sever one of the bank’s most profitable businesses.
The Wall Street Journal reported on the talks on Wednesday. Apollo and Pimco declined to comment.
Credit Suisse’s board of directors and management decided that the entity required too much capital and barely overlapped with the private wealth business, which will become the bank’s core business after the strategic review.
If approved, the deal would further underscore the increasing presence of private capital groups in many of the most lucrative, if risky, areas of lending. These companies have begun building large in-house underwriting operations that issue asset-backed loans to feed into their life insurance and annuity businesses.
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Apollo, for example, spent more than $100 billion in the last 12 months.
By investing assets directly, Apollo and Pimco seek to ensure they have a stable source of credit investment and a good sense of the quality of the securities they sell on to their investors.
Private lending firms have stepped into a void created over the past 15 years as European banks pulled out of once valuable businesses to deal with losses from the financial crisis, regulatory changes and what until recently was a long era of low interest rates.
As bank lending became more constrained, many European companies turned to alternative sources to fund their operations.