Credit Suisse to borrow up to $54 billion from the Swiss central bank

Credit Suisse Group AG arranged to borrow up to 50 billion francs ($54 billion) from the Swiss National Bank and offered to buy back the debt in a bid to reverse collapsing market confidence.

The troubled lender will borrow from a liquidity facility and make a tender offer to buy up to three billion francs of debt denominated in dollars and euros, according to a press release.

These measures, unprecedented at a major Swiss lender since the 2008 financial crisis, are the most important to date to shore up Credit Suisse’s finances. Shares of the bank fell 31% on Wednesday in Zurich trading, and its bonds fell to levels that signal deep financial distress, as lingering doubts about the scandal-ridden lender combined with a global clearance sale in banking stocks.

The government, central bank and financial regulator Finma discussed ways to stabilize the bank after a tumultuous day sparked by comments from the company’s biggest investor, Bloomberg reported earlier.

“These steps demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation,” Chief Executive Ulrich Koerner said in the statement. “My team and I are committed to moving forward quickly to deliver a simpler, more focused bank built around customer needs.”

Debt buyback

Credit Suisse has announced at least its second debt buyback in the past six months alone, in a bid to restore investor confidence. He offered to buy about $3 billion of its debt in October last year, saying at the time that it wanted to “take advantage of market conditions to buy back debt at attractive prices”.

The latest tender offer is for ten senior debt securities up to $2.5 billion, as well as four senior euro-denominated debt securities up to €500 million.

Switzerland’s second-largest lender, whose roots date back to 1856, has been battered in recent years by a series of blow-ups, scandals, management overhauls and legal troubles. The company’s 7.3 billion franc loss last year wiped out profits of the previous decade, and the bank’s second strategic pivot in as many years has so far failed to convince investors. investors or to stop customer outflows.

Management Comments

CEO Koerner on Tuesday asked for patience and said the bank’s financial condition was sound. He pointed to the company’s liquidity coverage ratio, which indicates the bank can handle more than a month’s worth of cash outflows in times of crisis. Chairman Axel Lehmann had told a conference on Wednesday that government aid “is not a topic” and that the company’s efforts to return to profitability are not comparable to the serious liquidity problems plaguing the small lenders in the United States.

Bloomberg reported earlier that the government, central bank and Finma were in contact to discuss ways to stabilize Credit Suisse. Ideas floated – beyond the public show of support – included a separation of the Swiss unit from the bank and an orchestrated long-term tie-up with a larger Swiss rival UBS Group AG, people familiar with the matter said, warning that it is unclear which of these steps, if any, would actually be carried out.

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