Credit Suisse’s bonds fell further on Thursday, leaving them firmly in distressed territory even after the troubled lender turned to the Swiss central bank for support and said it would buy back SFr3bn ($3.2bn) in debt.
Credit Suisse dollar bonds maturing in 2027 gave up gains to trade at 66 cents on the dollar, down about 5 percent on the day from the start of the session. Another dollar bond maturing in 2028 fell 13 percent to below 64 cents. Shares of the troubled lender were hurt on Thursday despite a recovery.
Prices below 70 cents are generally considered a marker of distress, meaning that the borrower is less likely to meet its payment obligations to debt holders. The bonds in question were trading in the 80s and 90s, respectively, on Monday, but have fallen sharply this week after the president of the Saudi National Bank ruled out further investment in Credit Suisse’s main shareholder, the Swiss bank.
US institutions also followed the failures of Silicon Valley Bank and Signature Bank in recent days, raising fears over the health of the broader global banking system and sending shockwaves through financial markets.
Credit Suisse sought to reassure investors late on Wednesday by announcing plans to borrow up to SFr50bn from the Swiss central bank and buy back some of its debt to improve liquidity. The bank has placed a tender offer to buy up to $2.5bn of 10 dollar-denominated senior debt securities maturing between 2023 and 2025.
It also offered to buy four euro-nominated senior debt securities of up to €500mn, with both offers expiring on 22 March.
Some of the bank’s bonds rose on Thursday, with the dollar instrument maturing in May 2023 – included in the list for repurchase by Credit Suisse – adding 4.7 percent to about 97 cents on the dollar. The May bond is first in line for the bank’s buyback operation, followed by the August 2023 bond which was trading at 96 cents, up more than 10 percent on Thursday.
But the significant pressure on other Credit Suisse debt securities underscores continued concerns about the bank’s liquidity and access to capital, highlighting the impact of much higher interest rates since SVB’s collapse. The tech-focused bank sold its bond portfolio at a steep loss due to a rush of deposit outflows.
Credit Suisse has been rocked by various scandals in recent years, including the biggest trading loss in its 167-year history after the execution of Arcagos Capital and the closure of a $10bn investment fund linked to failed finance firm Greensil.
The cost of Credit Suisse buying insurance against default on its debt has risen further in recent days, according to so-called credit default swaps tracked by Bloomberg. The bank’s five-year dollar CDS rose more than 1,000 basis points this week, from 462bp as recently as last Friday.
