LONDON – Credit Suisse Group has invited about 20 banks to join the syndicate for its US$4 billion (S$5.7 billion) rights issue, which should help the struggling Swiss lender finance another multi-year restructuring programme, according to people familiar with the plan.
The bank’s new chief financial officer, Mr Dixit Joshi, held a due diligence call for the capital increase – dubbed Project Ghana – with a group of bankers last 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, Royal Bank of Canada, Deutsche Bank and Societe Generale – announced last Thursday, 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, 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 did not immediately reply to requests for comment. Credit Suisse declined to comment.
Some lenders may decide against participating in the rights issue, however it is fully underwritten, the people said.
The bank is seeking to raise four 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 last Thursday that basically marks a major retreat from investment banking for Switzerland’s No. 2 lender.
While the announcement included major strategic shifts, it disappointed investors, who remained concerned about execution risks of the restructuring as well as a deterioration of profits in Credit Suisse’s core business of wealth and asset management. Shares of the bank fell further, dropping below four 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 one another 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 and cash management to bond issuance and custodial services. The risk to signing up to a capital increase is a crash in a company’s share price.
If the underwriter does not manage to sell off the shares, these will end up on its own books. BLOOMBERG
