Credit Suisse Nears Sale of Securitized-Products Group
Two bidding groups are vying for a unit that doesn’t fit the bank’s new shape
Credit Suisse Group AG CS 0.42% is racing to finalize the sale of a key unit, days before the beleaguered Swiss bank is set to give details of a revamp of its big Wall Street division.
The Swiss bank is selling billions of dollars worth of assets to help pay for a strategy change after a series of financial losses and scandals. It may still need additional capital to add comfort for investors that it can carry out plans to retreat from some businesses and countries that are no longer deemed core, analysts say.
The biggest disposal, now close to being completed, according to people familiar with that effort, is Credit Suisse’s CS 0.42% New York-based securitized-products group. The bank said in July it would sell all or part of the unit, which lends and trades in asset-backed financing markets.
Two bidding groups have emerged as the favorites for the business. One consortium includes bond manager Pacific Investment Management Co. and buyout firm Apollo Global Management Inc. In the second group, Centerbridge Partners has teamed with Martello Re Ltd., a life and reinsurance company, according to some of the people familiar with the effort.
Germany’s Allianz SE owns Pimco, while Massachusetts Mutual Life Insurance Co. is a minority investor in Martello Re. Centerbridge helped create the reinsurer and has an agreement to help manage its assets.
It couldn’t be learned whether the winning bidders would take over the entire unit with employees attached or take a majority stake in the business, for example, or what they might pay. Credit Suisse is updating investors on the and other strategic measures on Thursday, when it will also report third-quarter results.
The storied bank has been trying to find the right mix of businesses for a decade. It clung to a large Wall Street arm through earlier restructurings to avoid losing needed revenue. In July, amid a drought in deal making and other client transactions, new executives at the bank said it was time for hard decisions. They have been carving out units to sell and said costs must come down.
On Friday, Credit Suisse sold an 8.6% stake in funds distributor Allfunds Group for around $327 million and raised additional cash from a 30% stake in a fund manager. It put the Savoy Hotel in Zurich up for sale in recent weeks to raise potentially half a billion dollars.
Credit Suisse has been talking to investors about whether it needs additional capital. Among those considering investing are Saudi Arabia’s sovereign-wealth fund and some existing Credit Suisse shareholders, according to people familiar with the matter.
Credit Suisse’s restructuring is taking a page from other banks’ playbooks a decade ago, following the global financial crisis. Its main rival, UBS Group AG , pared back to be a wealth manager with a smaller investment bank competing in targeted areas. Now a group of former UBS executives are helping with the Credit Suisse cleanup, including Credit Suisse’s chairman and chief executive. They said earlier restructurings didn’t go deep enough.
In addition to selling the securitized-products group, Credit Suisse will exit from more than two dozen smaller wealth markets and put some assets in a resolution unit, The Wall Street Journal previously reported.