Credit Suisse preps Tier 1 CoCo bond
* Swiss SIFI could issue as much as CHF1bn
* Bankers predict 5.5%-6% coupon
By Aimee Donnellan
LONDON, Aug 16 (IFR) - Credit Suisse is set to further boost its capital next week with a new Tier 1 contingent capital bond (CoCo) to meet stringent requirements that have been set by the Swiss authorities.
The Swiss SIFI is planning to host an investor roadshow in Switzerland on Monday, August 19, visiting accounts first in Geneva and then Zurich. A decision on execution strategy of the CoCo is likely to follow, a banker told IFR.
Credit Suisse has been steadily boosting its capital base over the past year. At the beginning of August, it issued a USD2.5bn low-trigger Tier 2 total loss CoCo with a coupon of 6.5%.
"This isn't the first and it won't be the last Tier 1 bond from a Swiss bank," said a syndicate banker.
"The country's banks have to raise a lot of capital and I think Credit Suisse is likely to play it safe on structure and replicate previous offerings."
Raiffeisen Schweiz Cooperative (SVR) and Julius Baer have both issued perpetual non-call five and five-and-a-half year deals respectively over the past 12 months and bankers say they offer the best comparables for structure.
Both issuer's bonds have a 5.125% Core Tier 1 trigger.
Julius Baer's deal has no step, a coupon reset at the call and non-cumulative discretionary coupons, as well as contingent write-downs on a breach of the 5.125% Core Tier 1/Common Equity Tier 1 threshold or a viability event.
Swiss market experts say they are eager to see the price of the new perpetual bond, particularly as the bank is heard to be looking for a chunky size.
"We hear they are looking to sell CHF750m-CHF1bn (USD810m-USD1.08bn), which means they are going to have to pay around 5.5% to 6%," a syndicate banker said.
If they targeted a smaller size, they could probably price a deal with a 5% coupon, he added.
Credit Suisse declined to comment.
Setting up pricing benchmarks for Tier 1 instruments is of vital importance for both Swiss and European issuers.
So far, in the euro market, Spain's BBVA has been the only issuer to brave the Tier 1 market this year, selling a USD1.5bn bond with a 9% coupon - the first offering of its kind to comply with the Capital Requirements Directive (CRD IV).
However, Switzerland's banks have been better positioned to beef up their capital bases.
The country's early adoption of Basel III proposals has pushed many banks and other financial companies to issue capital-shoring subordinated paper, including the Credit Suisse and UBS CoCos and ZKB's unique Additional Tier 1 in 2012.
Swiss banks have pruned assets, raised capital and cut their investment banking arms to meet stricter rules spawned by the global financial crisis, and Swiss authorities added extra regulations after the Swiss state had to bail out UBS in 2008.
But the Swiss regulator still wants more as in June it urged its two biggest banks - Credit Suisse and UBS - to stay on course with planned measures that it said are likely to lead to a "substantial" improvement in leverage, or debt-to-equity ratios by year-end.
($1 = 0.9258 Swiss francs) (Reporting by Aimee Donnellan; Editing by Natalie Harrison and Anil Mayre)
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