Credit Suisse gives details of its $4bn rights issue

Zurich — Credit Suisse has unveiled details of its plan to raise Sf4bn ($4.01 billion) from investors to support the embattled bank’s bid to tackle the biggest crisis in its 166-year history.

Switzerland’s second-biggest lender is raising new capital to fund an overhaul, which will see it cut thousands of jobs and shift its focus away from investment banking and towards the less turbulent area of wealth management.

Its reputation has been battered by a string of scandals and losses, including a $5.5bn loss from the unravelling of US investment firm Archegos, and it had to freeze $10bn worth of supply chain finance funds linked to insolvent British financier Greensill.

The bank now is offering new and existing shareholders the chance to buy new shares.

It said new investors have committed to buying 462-million new shares at a purchase price of Sf3.82 ($3.83), equivalent to 94% of the volume weighted average price of Credit Suisse shares on October 27 and 28, raising Sf1.76bn.

A total of  307.6-million of the new shares are expected to be bought by Saudi National Bank, giving it a 9.9% stake in Credit Suisse.

Existing investors meanwhile will get the chance to buy 889-million shares being offered at Sf2.52 per share, with subscription rights corresponding to the size of their present stake.

It is expected that seven pre-emptive subscription rights will entitle their holder to purchase two new shares at a 32% discount on the reference price, Credit Suisse said.

The bank’s shares opened 3.2% higher in Switzerland at Sf40.55 Swiss francs. They are down about 55% in 2022.

Both issues have to be approved at an extraordinary general meeting due to be held on November 23. The final terms of the rights issue are expected to be announced the following day.

If shareholders reject the plan, Credit Suisse said it would issue 1.8-billion new shares at an offer price of Sf2.27 per share, which would still enable it to raise Sf4bn.

“We assume that the offering to qualified investors will take place and that the number of CS shares will rise from currently 2.6-billion to 4.0-billion,” analysts at Bank Vontobel said.

“In our financial model, we had increased the number from 2.6-billion to 3.6-billion in September. We will have to raise it to 4-billion.”

Analysts at JPMorgan said the capital increase will lead to 27% total dilution in the economic earnings of Credit Suisse shares.

The bank has been pushing to sell assets to raise money and free up capital to try to limit how much cash it needs to raise to handle its legacy litigation costs and retain a cushion for rough markets ahead.

On Monday, Credit Suisse said it would act as its own global co-ordinator for the rights offering, while Deutsche Bank, Morgan Stanley, RBC Capital Markets and Societe Generale would be joint lead managers and joint bookrunners.

ABN AMRO in co-operation with ODDO BHF SCA, Banco Santander, Bank of America, Barclays, BNP Paribas, Citi, Commerzbank, Crédit Agricole CIB, Goldman Sachs International, ING, Intesa Sanpaolo, Keefe, Bruyette & Woods, Mediobanca, SMBC Nikko Capital Markets, Wells Fargo Securities International are acting as joint bookrunners. 

Reuters