Credit Suisse offers to buy back up to £2.7bn of its own debt in an attempt to calm jittery investors
Credit Suisse has offered to buy back up to £2.7billion of its own debt in an attempt to calm jittery investors.
The troubled bank announced the symbolic move after a torrid six months, in which its shares have plunged almost 40 per cent amid fears that it will have to raise cash for a drastic restructuring.
Earlier this week, the price of its credit default swaps – financial instruments bought by investors which effectively act as insurance if a company reneges on its debts – soared, in a sign that shareholders were becoming increasingly worried about Credit Suisse’s future.
Torrid time: Credit Suisse shares have plunged almost 40 per cent amid fears that it will have to raise cash for a drastic restructuring
In an attempted show of strength, the lender said yesterday that it would buy back some of its bonds from investors to reduce its debt and to prove it was not struggling for cash.
Analysts at Saxo Bank said it was ‘trying to bolster sentiment by buying back credit’.
Credit Suisse has been weighed down by its involvement in a string of scandals over the past couple of years, from the collapse of Greensill Capital to the implosion of hedge fund Archegos.
The bank has shaken up its board and claims it is improving its risk management practices but new chief executive Ulrich Korner is expected to announce a more radical plan over the coming weeks.
Despite Credit Suisse’s attempted show of strength, speculation still swirled on social media over the lender’s financial health, with some comparing the bond-buying offer to a similar move from Deutsche Bank when it had its back against the wall in 2016.
The German lender had to slash its operations following a series of regulatory fines, and did not make an annual profit again until 2021. Dixit Joshi, a former Deutsche executive, recently joined Credit Suisse as its finance boss.
But Credit Suisse investors seemed mollified – and shares rose by 5.4 per cent.
Tensions grew so strained among investors and clients that top executives spent last weekend reassuring them about how much the overhaul would cost.
Analysts have speculated that the bank will have to raise up to £3.7billion to pay for Korner’s restructuring plan.
Credit Suisse has also put up for sale the five-star Savoy hotel which it owns in the centre of Zurich, sparking further concerns that it is facing a cash crunch.
In a statement, the lender said that its offers to buy bonds back were ‘consistent with our proactive approach to managing our overall liability composition and optimising interest expense and allow us to take advantage of market conditions to repurchase debt at attractive prices’.