By Joanne Bladd
Move aims at meeting strict Swiss capital rules geared towards avoiding state-funded bailouts
Swiss bank Credit Suisse has said it is to raise 6bn Swiss
francs ($6.2bn) from Middle Eastern investors in a move towards meeting strict Swiss
The bank said Monday it will issue convertible bonds, known
as CoCos, to Qatar Holding and The Olayan Group, to be paid up on earlier than
Under new rules, Switzerland’s biggest lenders UBS and
Credit Suisse will have to issue CoCos, which covert into equity under certain
conditions, such if a bank’s capital ratio falls below a certain point.
CoCos are seen as a way to avoid government-funded bailouts
and to force investors to share in the pain should a bank get into trouble in
However, some banks have expressed doubts over whether
investors will be interested in such a financial instrument.
"The completion of a transaction of this size supports
our conviction that contingent capital can be a material source of capital for
the banking industry," Credit Suisse chief executive Brady Dougan said.
"We believe that it will put to rest concerns about the
attractiveness of these instruments to investors," he said.
The CoCos will be issued in exchange for hybrid capital with
higher coupons issued in 2008 currently held by the two investors, Credit Suisse
Ratings agency S&P has said banks globally may need to
raise as much as $1 trillion of CoCo-style capital in the next 5-10 years,
making a strong investor base essential.
Britain's Lloyd's Banking Group and Dutch lender Rabobank
have already issued types of CoCos.