Credit Suisse secures $54bn lifeline from SNB to avoid collapse

Credit Suisse is offering to buy USD and EUR denominated senior debt securities. Offer will expire on March 22, 2023.

Credit Suisse

Credit Suisse has announced it plans to exercise its option to borrow from the Swiss National Bank (SNB) up to CHF 50 billion ($54 billion) under a Covered Loan Facility as well as a short-term liquidity facility, which are fully collateralized by high quality assets.

The bank also stated that Credit Suisse International offers to repurchase certain OpCo senior debt securities for cash of up to approximately CHF 3 billion.

Credit Suisse will use the $54bn to manage liability composition and optimize interest expense

Credit Suisse CEO Ulrich Koerner said: “These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders. We thank the SNB and FINMA as we execute our strategic transformation. My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.”

The announcement has already relieved the financial markets, with its stock shooting back up by 22%, as the additional liquidity would support Credit Suisse’s core businesses and clients in a hard time for highly indebted financial services firms due to rising interest rates.

Credit Suisse is making a cash tender offer in relation to ten US dollar denominated senior debt securities for an aggregate consideration of up to USD 2.5 billion.

The bank is also announcing a separate cash tender offer in relation to four Euro denominated senior debt securities for an aggregate consideration of up to EUR 500 million.

The offers will expire on March 22, 2023 and are consistent with the bank’s proactive approach to managing its overall liability composition and optimizing interest expense.

As of the end of 2022, Credit Suisse had a CET1 ratio of 14.1% and an average liquidity coverage ratio1 (LCR) of 144%, which has since improved to approximately 150% (as of March 14, 2023). The use of the Covered Loan Facility of CHF 39 billion will further strengthen the LCR with immediate effect.

Credit Suisse says it is conservatively positioned against interest rate risks. The volume of duration fixed income securities is not material compared to the overall HQLA (high quality liquid assets) portfolio and, in addition, is fully hedged for moves in interest rates. Moreover, the loan book is highly collateralized at almost 90%, with more than 60% in Switzerland and an average provision for credit loss ratio of 8 bps across Wealth Management and the Swiss Bank.