It does not say the purchase price of part of its unit of securitized products, but it is known that it will not be at a discount
Credit Suisse updated investors on Tuesday about its efforts to unload a portion of its investment bank, though it didn’t have much to say. However, one word in an otherwise confusing statement, “bonus,” shows that the whole exercise was probably worth it for CEO Ulrich Körner.
The $12 billion Swiss bank said it was divesting about $55 billion of assets in its securitized products unit, mainly sold to Apollo Global Management, as part of a broader plan to reduce the parts of investment banking that they don’t help your core business of wealth.
However, key financial details, such as the price, have not been released. The US buyer, who already has some $523 billion of client money, will also manage Credit Suisse’s remaining $20 billion of packaged loans and mortgages, for a fee.
This structure of the deal will be a disappointment to shareholders who had hoped for a quick and clean exit from this highly profitable division, which is also responsible for structuring credit card loans and other strange debt products. The Apollo deal and other smaller transactions will only reduce Credit Suisse’s risk-weighted assets by about $10 billion by mid-2023, less than half the $22 billion Körner said the unit had at the end of the year. of September. The rest will have to be reduced over time, and probably very slowly: the asset management agreement with Apollo will run for five years.
But there are also good reasons for the vagueness. Some of the underlying borrowers, for example, have to consent to the change of ownership, says a source familiar with the matter. And debtors may be able to repay early. Both dynamics mean that quantities are a moving target.
Credit Suisse also said that the final sale price will depend on discount rates. This suggests that both he and Apollo could update the terms based on prevailing interest rates when they are ready to close the deal.
However, investors already have the most important detail. Credit Suisse said in its statement that the expected boost to its capital levels will depend on the premium paid by Apollo, meaning a discount sale is out of the question. Since Körner is selling from a position of weakness amid thorny markets, that represents a win for shareholders. Even fuzzy agreement is better than none.
