Credit Suisse’s $4 billion investment bank spin out due to Saudi Arabia
As much as 7.5% of the Swiss firm's planned investment bank spin out was due to the possibility that Saudi Arabian Crown Prince Mohammed bin Salman will take a stake in the Swiss firm's planned investment bank spin out.
People who have knowledge of the matter said Bin Salman may put $500 million into the vehicle. The people said that the former Barclays Plc chief executive Bob Diamond's Atlas Merchant Capital may be among the investors who asked not to be identified as the deliberations are private. It is not clear whether the Crown Prince's interest will come in a personal capacity or through other investment vehicles in the Kingdom.
The Saudi National Bank, 37% owned by the nation's sovereign wealth fund, is an anchor investor in Credit Suisse's $4 billion capital raise. A further investment by the oil-rich nation would boost confidence in the lender's restructuring efforts. Bank executives have already said several parties are interested in the re-creation of the Credit Suisse First Boston brand under the veteran dealmaker Michael Klein.
Credit Suisse didn't want to say anything. Saudi Arabia's Center for International Communications didn't respond immediately to a request for comment.
The Zurich-based bank extended gains on Friday when Chairman Axel Lehmann helped break a 13 day losing streak. The stock traded up 5.4% at 3.11 Swiss francs at 12: 10 p.m in Zurich. They are down about 63% this year.
The bank's liquidity situation had improved and the huge outflows of client assets had been stopped earlier in the quarter, according to Lehmann. Declines of the past weeks had pushed the shares near the level that the Swiss lender is pitching to investors in the capital raise, damaging the offer's attractiveness to investors.
Klein is taking over the First Boston business and will try to protect and restore some of the lender's historically strongest investment banking businesses, such as mergers and acquisitions and leveraged finance. The Swiss firm's investment bank division was named Credit Suisse First Boston for almost two decades before it decided to retire the name in 2005 in favor of one moniker for all its businesses.
A potential investment by the Saudi Arabian leader, known as MBS, would be a further demonstration of the strength of Klein's Middle East ties. His connections in the Kingdom have been a key part of the plans for the investment bank and the capital increase. He was directly involved in helping to set up the investment by the Saudi National Bank, allowing it to take a stake of as much as 9.9%, according to people with knowledge of the discussions.
The dealmaker's links with the Middle East stretch back at least to his Citigroup days, where he led negotiations over a $7.5 billion capital injection from Abu Dhabi during the financial crisis. He was a member of the Citigroup team that helped Dow Chemical Co. get funding from the Kuwait Investment Authority.
Credit Suisse has completed $5 billion in new debt issuance, part of its plan to shore up its balance sheet, and will provide an updated funding plan for 2023 when it releases fourth quarter earnings on February 9.
Credit Suisse needs funds from the rights to finance job cuts and spin out of the major overhaul, as well as other elements of its major overhaul.
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