Reuters/London

 

 

Credit Suisse plans to raise about 6bn Swiss francs ($6.3bn) by offering cornerstone shareholders such as Qatar Holding and Olayan Group

Credit Suisse will test mainstream investor appetite for so-called CoCos, which boost capital but convert into equity if a bank runs into trouble, by issuing another $2bn of the bonds.

The Swiss bank is pioneering the contingent capital bonds favoured by banking regulators. Earlier this week it agreed to sell another to two big Middle Eastern investors.

Credit Suisse, which declined to comment yesterday, plans to raise about 6bn Swiss francs ($6.3bn) by offering cornerstone shareholders Qatar Holding and Olayan Group CoCos in exchange for existing hybrid securities.

Both CoCo issues convert to equity if Credit Suisse’s Core Tier 1 capital falls to 7%.

Its second bond sale gives another boost to a potential $1tn market. Regulators are keen banks use CoCos to cushion against losses and reduce the risk of taxpayer-funded bailouts.

Together, the two deals are a positive sign for creating a market for CoCos, which had received a cool reception from traditional fixed income investors, many of whom are not able to hold equity.

“Successful completion of the deal would be step forward for the asset class marking the first new issue of a contingent capital security that converts into shares outside of an exchange,” Gary Jenkins, head of fixed income research at Evolution Securities, said.

Switzerland has encouraged it two biggest banks UBS and Credit Suisse to issue the bonds to meet tougher capital rules to strengthen them after the credit crisis.

Before Credit Suisse, only Lloyds Banking Group and Dutch lender Rabobank had issued types of CoCos.

Credit Suisse’s latest deal was marketed to investors in Asia and Europe and is likely to offer a coupon of 7.875%, one financial institutions banker said.