As struggling Credit Suisse seeks to shed a major unit, private equity firms run in circles

Private equity is bracing for the possible sale of Credit Suisse Group’s U.S. asset management unit, or CSAM, as the troubled Swiss bank is set to present its latest restructuring plan.

Credit Suisse is expected to seek buyers for CSAM, which could sell for $2 billion. Companies such as GTCR, Genstar Capital and Reverence Capital Partners are interested in the CSAM business and will eventually consider making offers, people familiar with the situation said. Fortune.

The bank is expected to provide a strategy update on Thursday along with its third-quarter results. Credit Suisse said in July that it was assess strategic options for its securitized products business and is expected to announce the sale of the unit on Thursday. It is also considering a spin-off of its investment banking and advisory units, according to Bloomberg. (Credit Suisse declined to comment.)

Founded in 1856, Credit Suisse is one of Switzerland’s largest banks. It operates four divisions – wealth management, investment banking, Swiss banking and asset management – ​​with a presence in more than 50 countries. The bank was a leading underwriter of U.S. IPOs during the dot com boom of the late 1990s and early 2000s.

More recently, Credit Suisse’s fortunes changed after a series of scandals sent its stock plummeting. Credit Suisse was one of several Wall Street banks to deal with Archegos Capital Management, the $36 billion private investment firm that collapsed last year, according to the New York Times. Archegos’ collapse caused about $10 billion in losses at banks including Credit Suisse and Nomura, Reuters reported.

Shares of Credit Suisse, which trade on the SIX Swiss Exchange, have plunged 46% this year. They closed down 0.52% at 4.76 Swiss francs ($4.83) on Wednesday. Credit Suisse’s market capitalization was $13 billion.

To cover restructuring costs, potential additional litigation costs and possible regulatory headwinds, Credit Suisse needs to raise about 9 billion Swiss francs ($9.13 billion) of additional capital, said equity analyst Flora Bocahut. of Jefferies, in an October 13 research note. The bank’s most immediate need is likely closer to 4-6 billion Swiss francs ($4.05-6.08 billion), she said.

“CS must act to solve its profitability problem. CS management is well aware of this, which is why it has announced that it will present the conclusions of its new strategic review on October 27, as well as the results for the third quarter. Pressure is high for them to deliver, given the share price collapse to an all-time low of CHF 3.52 on October 3, 2022 (corresponding to a market capitalization just above CHF 9 billion , only) and the fact that this is the second strategic review in just one year (the last was in November 2021),” Bocahut said in the note.

Bocahut believes Credit Suisse will prioritize asset disposals. A full sale of the securitized products business at book value would free up about 3 billion Swiss francs ($3.04 billion) of capital, she said.

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