The rights of Credit Suisse Group AG are expected to be exercised by the banks handling the rights of the bank, spelling success for a capital raise that looked shaky as recently as last week.
Lenders arranging the deal expect investors to take up well above 90% of the stock on offer, the people said, asking not to be identified because the information is private. The banks don't currently expect to hold a large amount of Credit Suisse stock on their books after that, according to the people.
The people said that any remaining amount is expected to be small enough to be enough for banks to be able to sell the shares in the market. They'll be able to lean on sub-underwriters, major investors that have agreed to snap up a certain amount of unsold stock if needed. The rights issue was fully underwritten by about 20 banks and was led by Deutsche Bank AG, Morgan Stanley, RBC Capital Markets and Soci t G N rale SA.
In two steps, the bank is raising 4 billion francs in order to shore up its balance sheet, as it seeks to put aside concerns about its financial position after billions of losses over the past two years, recent client defections and asset outflows. The Saudi National Bank will be the bank's largest shareholder as a result of this transaction, with a stake of as much as 9.9%. Credit Suisse shares rose by 1.9% as of 3: 28 p.m in Zurich.
Credit Suisse needs the money to pay for the exit of large parts of its investment bank and 9,000 job cuts. The bank warned that it will have a fifth straight quarter of losses as it reels from years of scandals and missteps that have eroded investor confidence and sent clients fleeing.
A rights issue is an offering of shares to existing investors to buy shares in proportion to their holding at a discounted price. Taking up the rights compensates investors for the dilution that occurs in a capital raising. A successful rights offer can spell the end of a wild ride for the troubled Swiss bank's stock over the past weeks, when a 13 day losing streak took the shares down to near the price of what was supposed to be a heavily discounted offer. Chairman Axel Lehmann said on Friday that the bank had stopped massive outflows that provided some relief, only for the stock to resume its downward slide on Tuesday.
The shares fell to a new low of 2.67 Swiss francs last week, just above the price of 2.52 francs for subscription rights that Credit Suisse offered existing investors. After the strategy presentation in October, the bank had set the price at a discount of 32% to its stock value.
The main indicators of the bank's financial stability were strong and its level of liquidity was improving after declines in recent weeks, according to comments made by Chairman Axel Lehmann last week. Lehmann said the bank's liquidity coverage ratio, which measures the quantity of easily-sold assets available to meet obligations, is currently at 140%.
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