Credit Suisse sells most of its securitized products business to Apollo as it speeds up restructuring.
On Tuesday, Credit Suisse announced that it would accelerate restructuring its investment bank by selling a significant portion of its securitized products group (SPG) to Apollo Global Management. Credit Suisse said the transaction and the potential sale of other assets to third-party investors are expected to reduce SPG assets from around $75 billion to $20 billion. Credit Suisse announced a massive strategic overhaul at the end of October alongside a huge quarterly loss after battling sluggish investment banking revenues and litigation costs relating to a slew of legacy compliance and risk management failures. Central to the restructuring plan was an offload of risk-weighted assets (RWAs), with around $10 billion of these accounted for by Tuesday’s transactions, the bank said.
“The approximately USD 20 billion of remaining assets, which will generate income to support the exit from the SPG business, will be managed by Apollo under an investment management relationship with an expected term of five years to be entered into at the first closing,” Credit Suisse added in a statement. “Under the terms of the transactions contemplated with Apollo, Credit Suisse’s CET1 capital ratio is expected to be strengthened by the release of RWAs and the recognition, upon closing, of the premium paid by Apollo, whereby the final amount will depend on discount rates and other transaction-related factors.” The SPG is a substantial player in the public U.S. securitization market, mainly residential 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 restructure. These include the planned 1.5 billion Swiss francs ($1.6 billion) investment from the Saudi National Bank in exchange for a 9.9% shareholding, part of a 4 billion Swiss franc capital raise.