Credit Suisse agreed to sell a significant part of its securitised products group to Apollo Global Management in a deal that will help cut back a business that soaks up capital.
The transaction, along with the expected sale of other portfolio assets to third-party investors, is expected to reduce SPG’s assets from $75 billion to $20 billion (€72.3 billion to €19.3 billion), according to a statement from the bank on Tuesday.
Apollo will take on most of the SPG team, Credit Suisse said, while the Swiss bank will also provide financing for a share of the assets being transferred. The expected transactions will release $10 billion of risk-weighted assets, while Apollo will manage the $20 billion of remaining assets under an expected five-year investment management deal.
The sale of a significant part of SPG, as the business is known, was a key pillar – along with a $4 billion share offering – of Credit Suisse’s recently announced restructuring plan. The bank is seeking to shore up its finances and pay for an overhaul that will involve deep job cuts and carve-out of its investment banking unit.
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The bank is working on the overhaul as it seeks to return to profitability and put an end to a string of losses and reputational hits that have rocked the institution. Credit Suisse had previously said it was close to an agreement with Apollo on the deal.
The securitised products group, led since 2016 by New York-based trader Jay Kim, buys and sells securities backed by pools of mortgages and other assets, such as car loans or credit-card debt. The division also provides financing to clients who want to buy these products and will “securitise loans” – dicing them into new securities of varying risk and return – on their behalf and sell them to investors for a fee.
The lender was dealt a blow recently when S&P Global Ratings downgraded its long-term rating to just one level above junk status, citing execution risks in the restructuring plan. – Bloomberg
