Credit Suisse shares details of $4 bn capital raising plan
Credit Suisse detailed its intention to raise 4 billion Swiss francs ($4.01 billion) from investors on Monday in an effort to help the bank, which is in trouble, deal with the worst crisis in its 166-year existence.
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The second-largest lender in Switzerland is raising new capital to finance a restructuring that will result in thousands of job cuts and a change in emphasis away from investment banking and toward the less volatile field of wealth management.
A string of scandals and losses have damaged its reputation, including a $5.5 billion loss caused by the collapse of the American investment firm Archegos. In addition, it was forced to freeze $10 billion in supply chain finance funds connected to the bankrupt British financier Greensill.
Credit Suisse
The bank is currently allowing both new and current shareholders to purchase additional shares.
In order to raise 1.76 billion Swiss francs, it was announced that new investors had committed to purchasing 462 million additional shares at a purchase price of 3.82 Swiss francs ($3.83), or 94% of the volume-weighted average price of Credit Suisse shares on October 27 and 28.
“In September, we raised the figure from 2.6 billion to 3.6 billion in our financial model. We’ll need to increase it to $4 billion.”
The capital increase, according to JP Morgan analysts, will dilute the economic earnings of Credit Suisse shares by a total of 27%.
To reduce the amount of cash it has to raise to cover its historical litigation costs and maintain a buffer for upcoming choppy markets, the bank has been striving to sell assets to raise money and free up capital.
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