RBC -; Morgan Stanley may help Credit Suisse in raising capital

19 Oct 2022 , 08:28 AM

With a little more than a week, until the crucial recovery plan is revealed, Credit Suisse Group AG executives are looking for ways to raise money everywhere – and are ready to turn to outside investors in case they need more.

In case it needs to raise money for its restructuring, the Zurich-based bank is collaborating with the Royal Bank of Canada and Morgan Stanley on a prospective capital increase, according to news reports. These conversations support efforts to sell off some business units, most likely including sizable portions of the investment bank and maybe asset management in the US.

After the bank makes a formal restructuring announcement on October 27, a capital increase–which the bank is considering under the term “Project Ghana”–could happen.

Investors are uncertain about the cost for Chief Executive Officer Ulrich Koerner to rebuild trust in the venerable Swiss company after years of scandals and multibillion-dollar losses. Analyst predictions have varied from $4 billion to as much as $8 billion; however, executives may try to keep the number initially lower given the current state of the markets and the low valuations.

According to news reports, if Credit Suisse were to initiate a capital raising, it would probably seek at least $2 billion to cover restructuring costs and any operating losses over the following two years while it pivots the business.

As of 5:25 p.m. in Zurich (8:55 p.m. IST), Credit Suisse shares were up 1.8% to 4.62 Swiss francs, up as much as 4.3% on Tuesday, suggesting investors may view a capital increase as less dilutive than some may have anticipated.

Reports indicated that Credit Suisse has already contacted the Qatar Investment Authority and others to determine interest in potential capital injection. Other Middle Eastern funds are debating whether to invest in its investment banking branch or other industries, reports stated. Examples include Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co.

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