Swiss credit announced on Tuesday that it would accelerate the restructuring of its investment bank by selling a significant portion of its securitized products group (SPG) to Apollo Global Management.
Credit Suisse said the transaction, along with the potential sale of other assets to third-party investors, is expected to reduce SPG assets from about $75 billion to $20 billion.
The bank said the move represented an “important step towards a managed exit from the Securitized Products business, which is expected to significantly reduce risk for the investment bank and free up capital to invest in Credit Suisse̵[ads1]7;s core business.”
Credit Suisse announced a massive strategic overhaul in late October alongside a huge quarterly loss, after battling weak investment banking revenue and legal costs linked to a series of legacy compliance and risk management failures.
Central to the restructuring plan was a relief of risk-weighted assets (RWA), with about $10 billion of that accounted for by Tuesday’s transactions, the bank said.
“The approximately $20 billion of remaining assets, which will generate income to support the exit of the SPG business, will be managed by Apollo under an investment management relationship with an expected term of five years to be entered into upon initial closing,” Credit Suisse said to in a statement.
“Pursuant to the terms of the transactions contemplated with Apollo, Credit Suisse’s core capital adequacy is expected to be strengthened by the release of RWAs and the recognition, at closing, of the premium paid by Apollo, the final amount of which will depend on discount rates and other transaction-related factors.”
SPG is a significant player in the public US securitization market, particularly in mortgage-backed securities.
Credit Suisse will hold an extraordinary general meeting next week to seek the green light from shareholders on several key elements of the restructuring. These include the planned investment of 1.5 billion Swiss francs ($1.6 billion) from the Saudi National Bank in exchange for a 9.9% stake, part of a 4 billion Swiss franc capital raising.
This is a news in development and will be updated soon.