Credit Suisse raises $4.3 billion in capital after Wild Ride

(Bloomberg) — Credit Suisse Group AG completed a two-way capital increase of 4 billion francs ($4.3 billion), giving CEO Ulrich Koerner the funds needed to begin a comprehensive restructuring of the troubled lender.

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The investors agreed to buy 98.2 percent of the shares on sale in a rights offer to raise 2.24 billion francs, Credit Suisse said in a statement late Thursday. The remaining shares will be sold on the market at or above the offer price of 2.52 francs per share.

The rights issue was the second stage of the bank’s capital raising. The Zurich-based firm already raised 1.76 billion francs in a private placement last month for investors including Saudi National Bank, which will become the largest shareholder with just under 10%.

Shares gained about 3.5 percent in early trading in Zurich on Friday.

Credit Suisse is bolstering its finances to calm investor concerns after billions in losses over the past two years, recent customer walkouts and asset outflows. The funds will help pay for exiting large parts of its investment bank and cutting 9,000 jobs. Rocked by years of scandals and missteps, Credit Suisse warned of a fifth consecutive unprofitable quarter.

The completed rights offer marks the end of a wild ride for shares of the troubled Swiss bank in recent weeks, when at one point a 13-day losing streak took shares close to the price of what was thought to be a deeply discounted offer. Chairman Axel Lehman’s comments on December 2 that the bank had halted massive outflows provided some relief.

“The successful completion of the capital increase is a key milestone for the new Credit Suisse,” Koerner said in the statement. “This will allow us to continue to support our strategic priorities from a position of capital strength and create a simpler, more stable and more focused bank built around customer needs.”

A rights issue is the offering of shares to existing investors to allow them to buy shares in proportion to their holdings at a discounted price. Underwriting compensates investors for the dilution that occurs when raising capital.

Last week, the stock fell to a record low of around 2.67 Swiss francs, just above the 2.52 franc price for the subscription rights that Credit Suisse offered to existing investors. The bank had set the price at a discount of around 32% to the value of its shares after unveiling the strategy in October.

The bank said the rights offering would improve its CET1 ratio, a key measure of financial strength, by about 140 basis points. He also said that the cost-saving measures he had already started accounted for about 80% of the planned 1.2 billion franc reduction in the 2023 cost base.

The rights issue was fully underwritten by about 20 banks, led by Deutsche Bank AG, Morgan Stanley, RBC Capital Markets and Societe Generale SA.

(Updates with shares in the fourth paragraph)

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