Credit Suisse Offers $3B Debt Buyback

Facts

• On Friday, Credit Suisse announced a $3B debt repurchase plan to take advantage of low prices and reduce its funding costs amid concerns about the financial position of the Swiss bank. It also revealed that it's selling the famous Savoy Hotel in Zurich.¹
• The buyback offer includes euro and pound sterling debt securities worth up to $980M and US dollar securities worth up to $2B. After the announcement, Credit Suisse shares went up, and the cost of insuring against default on five-year senior debt fell.²
• This comes as the bank has sought to reassure investors of the strength of its balance sheet after a week of intense scrutiny on its financial health, with its five-year credit default swaps (CDS) hitting a record high and its shares falling to a record low on Monday.³
• In buying back its debt, Credit Suisse follows the playbook adopted by Deutsche Bank in 2016 when facing a similar crisis and doubts over its future.⁴
• The announcement precedes an anticipated strategy overhaul – the second in a year – to restore faith in the lender, which is expected to be presented alongside Q3 earnings on Oct. 27.²
• The strategic review — under a new CEO — comes after several risk management failures and scandals, including the bank's $5B exposure to hedge fund Archegos, which collapsed in March 2021.⁵

Sources: ¹CNN, ²Bloomberg, ³FT, ⁴Reuters and ⁵CNBC.

Narratives

• Narrative A, as provided by Business Insider. Credit Suisse has made the right decision to calm anxious investors after a week of concerns about the bank's financial health, indicating that it isn't facing a liquidity crunch and allowing it to save money. This move has successfully boosted its shares and reduced the cost of insuring its debt.
• Narrative B, as provided by SWI swissinfo.ch. Though Credit Suisse shares have jumped following this announcement, the debt buyback represents only temporary relief to the bank's ongoing crisis. Only a deep restructuring plan can restore confidence and attract the billionaire amount of money needed to break the cycle of bad news involving Credit Suisse.