Embattled bank Credit Suisse (CSGN.S) on Monday provided further information about its strategy to collect 4 billion Swiss francs (about $4.01 billion) from its investors to help it combat the largest crisis in its 166-year existence.
The second-largest lender in Switzerland is establishing new capital to finance a restructuring that will result in thousands of job cuts and a change in emphasis away from investments banking toward the less volatile field of wealth management.
Several scandals and losses have damaged its reputation, including a $5.5 billion deficit caused by the collapse of the American investment firm Archegos. In addition, it was forced to halt $10 billion in the supply chain finances fund linked to the bankrupt and laying low British financier Greensill.
Saudi National Bank (1180.SE) is anticipated to purchase 307.6 million of the additional shares, giving it a 9.9% ownership position in Credit Suisse.
As a result, existing investors will have the opportunity to purchase 889 million shares for 2.52 francs each, with subscription rights commensurate with the size of their current investment.
According to Credit Suisse, seven pre-emptive registration rights are anticipated to empower their owner to buy two additional shares at a 32% discount from the reference price.
Shares of the bank opened in Switzerland 3.2% higher at 40.55 Swiss francs. This year, they have fallen by around 55%.
Both matters must be adopted in the special general meeting scheduled for November 23. The rights issue’s final conditions will likely be revealed the following day.
Credit Suisse stated that it would offer 1.8 billion newer shares at a market rate of 2.27 francs each share if shareholders reject the proposal, allowing it to still raise 4 billion francs.
According to analysts at Bank Vontobel, the offering to eligible investors may go through, increasing the number of CS shares from the existing 2.6 billion to 4.0 billion.
In September, they raised the figure from 2.6 billion to 3.6 billion in their financial model. They must increase it to 4 billion.
JP Morgan analysts predicted a 27% overall dilution in the economic profits of Credit Suisse shares as a result of the capital expansion.
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 generate money and liberate capital.
Credit Suisse announced on Monday that it would function as its own international coordinator for the share issue, with joint lead managers and joint book-runners being Deutsche Bank, Morgan Stanley, RBC Capital Markets, and Societe Generale.
As joint bookrunners, ABN AMRO is working in conjunction with ODDO BHF SCA, Barclays, Banco Santander, Bank of America, Citi, BNP Paribas, Commerzbank, Goldman Sachs International, Crédit Agricole CIB, Intesa Sanpaolo, ING, Keefe, SMBC Nikko Capital Markets, Mediobanca, Bruyette & Woods, and Wells Fargo
Meanwhile, on the Washington frontier on things— Attorney General of Washington State Bob Ferguson filed a lawsuit on Tuesday to prevent supermarket operator Albertsons Cos Inc (ACI.N) from delivering dividends to investors prior to the completion of its proposed merger with Kroger Co. (KR.N).
A statement on the website of the Washington Attorney General claimed the $4 billion gift to shareholders risks seriously undermining the supermarket giant’s capacity to compete throughout the extensive-time period regulatory agencies — notably Washington — will be reviewing the merger.
To compete better with leader Walmart Inc. on prices, Kroger acquired Albertsons in a $25 billion agreement last month. However, the acquisition was anticipated to encounter antitrust challenges.
On Tuesday or Wednesday, the Attorney General will submit a request for a temporary restraining order, which, if approved, will prevent Albertsons from paying the payout while Ferguson’s case is pending.