Credit Suisse is expected to pay near-double-digit interest rates for its latest bond issue, as investors are demanding high compensation from the crisis-stricken bank.
The Swiss lender is set to pay 9.75% interest on its new debt sold out late Thursday, according to people familiar with the matter.
The bank will raise at least $ 1.5 billion and its bond issuance comes against the backdrop of a sale in the financial markets, with large central banks raising interest rates in an effort to curb spiral inflation.
“This is the first time in years that we’re seeing a double-digit coupon,” said a bond investor. “We forgot what double-digit looks like but it’s really close.”
Credit Suisse has gone from crisis to crisis in the last two years, exposing risk management and poor controls at the Zurich-based lender. The breakup of Greensil Capital forced the bank to close $ 10 billion in funds linked to the credit group and weeks later it suffered a record $ 5.5 billion trade loss following the collapse of Bill Hwang Archegos’ family office.
Last month the UK financial regulator put the bank on a Follow-up list Of groups in need of more rigorous supervision.
The problems hurt Credit Suisse’s share price and contributed to three profit warnings. Credit rating agencies Fitch and S&P both downgraded the bank last month.
Credit Suisse raises the funds through additional Tier 1 (AT1) new bonds. AT1 bonds are sometimes called “conditional conversion” or coconut because they can be converted to capital under pressure. In 2011, the bank based in Zurich became the first to issue such debts, and the issue on Thursday is expected to replace the last of the bonds that pay interest at 7.125% and can be converted next month.
“They decided they wanted to redeem even if it was a little more expensive. Credit Suisse’s new bonds, AT1, will not be converted into capital if the bank’s capital ratio falls below regulatory standards, but will be reduced.
The Swiss private bank Julius Baer and SEB of Sweden have in recent weeks raised an AT1 debt denominated in dollars at an interest rate of 6.875%, well below that of Credit Suisse.
Beleaguered Credit Suisse to pay almost 10% rate on bonds Source link Beleaguered Credit Suisse to pay almost 10% rate on bonds