* Credit Suisse launches first T1 CoCo in francs
* Bank blames small deal size on poor market conditions
* Some investors wary of too much "equity" exposure
By Jon Penner
LONDON, Aug 23 (IFR) - Despite reopening the Swiss market
after the summer lull, Credit Suisse failed to gain the traction
it desired with its latest capital raising exercise, a perpetual
non-call five-year 6% low-trigger Tier 1 CoCo.
Early indications had been that the Swiss giant was looking
for CHF500m or more, but in the end, only CHF250m was printed.
Orders were numerous but in a smaller size than might have
been expected, as the private bank clients got spooked by
"We had good attendance at the roadshow in Zurich and Geneva
on Monday with around 80 attendees in total," said Dominique
Kunz, head of Swiss debt capital markets at Credit Suisse in
"Feedback at the time was very positive, but when the
market tanked on Tuesday some of that demand fell away. With 90
orders from pretty much every private bank in the country, we
saw good breadth of demand despite challenging market
The bonds are expected to be rated BB+ by Fitch. Alongside
the perpetual callable nature of the bonds and the optional
coupon deferral, this sub investment grade rating was another
factor which put off Swiss institutional buyers.
"We reopened the retail market in Swissies and got good
breadth, if not the depth we might have expected," echoed Andre
Schmid, head of Swiss franc fixed income syndicate at Credit
Last week the wider FIG market saw a range of issuers sell
over EUR10bn equivalent of deals in euro and sterling.
Some investors thought the deal's timing might not have been
optimal. Despite the holiday season being officially over in
Zurich, some accounts were still not available, while others had
declined the paper, citing enough exposure to Credit Suisse via
One investor said that if he wanted fixed income with an
enhanced yield, but without the risk of coupon deferment, then
he would buy lower tier 2 paper. Another said the doubling up of
risk, potentially losing share dividends and T1 coupons at the
same time, was too much.
Raiffeisen, as well as an earlier deal from ZKB, had the
advantage that neither have publicly traded shares, making their
CoCos an equity proxy for investors who had never before had the
opportunity to invest in those banks.
Credit Suisse, on the other hand, is one of the largest
constituents of the SMI, ranking number seven with around 4.5%
of the index, behind the major corporate players Nestle,
Novartis, Roche, ABB and Richemont, as well as arch-rival bank
As such, many private clients will have equity exposure to
Widening the deal's spread was seen as unlikely to build
momentum as the smaller orders were not especially price
sensitive. In the end, the bonds priced at the tight end of the
guidance range of 6.00-6.25% and sold entirely to Swiss private
"This was our first instrument of this type in the Swiss
market, so the process was a bit of a learning experience for
us" said Rolf Enderli, group treasurer at Credit Suisse.
"After our international and institutionally targeted
USD2.5bn 6.5% ten year Tier 2 a couple of weeks ago, we wanted
something for our domestic retail investors".
That deal went extremely well, attracting orders of around
USD6.6bn from across the globe. Swiss investors took down around
8%, or USD200m.
Those Tier 2's were bid at just over par to give a 6.48%
yield. The old 7.125% BCN, with a 2017 call, was quoted around
5% yield to call.
After the investor meetings on Monday, books opened on
Tuesday morning and were kept open overnight to hit as many
accounts as possible. The CHF250m minimum size was reached on
Wednesday. At the par issue and reoffer price, the 6% coupon was
equivalent to mid swaps plus 520.3bp.
The deal has a five year reset, annual non-cumulative
coupons and a contingent write-down of 100% principal in the
event of CS's CET1 ratio (which includes its higher trigger CoCo
securities) falling below 5.125%, as well as the now customary
A similarly structured bond by Raiffeisen Schweiz, a CHF550m
3% PNC5 AT1 priced in April 2013 at par giving a spread of
mid-swaps plus 259bp, and was bid at 100.05 on SIX on Wednesday
morning, equivalent to around mid-swaps plus 225bp to the May
(Reporting by Jon Penner, IFR Markets, editing by Alex Chambers
and Andrew Perrin)