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Thursday, 23 November 2017

Swiss Franc Bond House: Credit Suisse

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Making the impossible possible

In a year where negative rates deepened further, forcing out ever more regular issuers, one bank stood out as a pioneer of the new thinking required to survive in the changed markets of 2016. For its leadership and conviction, and for pushing the boundaries of what was possible, Credit Suisse is IFR’s Swiss Franc Bond House of the Year.

The negative interest rate environment led to a fall in market volumes of SFr6bn compared with 2015, with international issuance falling by 15% and domestic deals down 11%. Despite this, Credit Suisse held on to its domestic lead with its market share of 29% (excluding the large regular Pfandbrief issuers PfZ and PSHypo, which more closely resemble quasi-sovereign issuance), its largest since 2011. In the international segment, its 36% share was in line with its five-year average, although below the exceptional levels for 2015.

The reorganisation as a strengthened investment bank – under the new entity of Credit Suisse (Switzerland) AG, which grouped advisory and M&A together with ECM and DCM – and with a tighter group in syndicate, sales and trading, and some “tactical underwriting”, accounted for much of the increase in its domestic share.

To kick things off, Credit Suisse reopened the utility sector with the SFr240m Nant de Drance 10-year deal, the first of the year, and continued to lead in the segment with more than SFr1bn from five other issuers. It also led the SFr200m debut from state-guaranteed railway group Rhaetische Bahn in the novel “dual-zero” nine and 15-year format.

It led both Matterhorns priced in the year, for Teva and Eli Lilly’s M&A-based financings.

Credit Suisse maintained its leadership in US corporate issuance in the Swiss franc, as sole or joint lead for every deal, and extended its long run as lead on every deal since the US Foreign Account Tax Compliance Act came along in 2012. This was particularly advantageous as US issuance had become the dominant region in international sector volumes.

Several higher-grade issuers, which had previously been mainstays, were forced out of the market with the economics, especially on a cross-currency basis, making new issues untenable.

Credit Suisse responded by targeting the small windows of opportunity with extended maturities or lower-rated issuers to achieve the yields or spreads needed by investors. A stand-out was Caribbean Development Bank’s 12-year brought by Credit Suisse as sole lead in June. It gave a pleasant pick-up to swaps and Swiss governments considering its projected repo eligibility with the SNB and the diversification opportunity afforded by a new name in the Double A supras field, which had seen very little issuance in the low rate environment.

In late October, Credit Suisse reopened the dormant Canadian province segment, not seen since Quebec in 2014, with a New Brunswick 15-year that doubled its starting size to print SFr400m of 0.2% November 2031s. The issuer had not been seen in the market since 2009, and printed its latest deal in twice the tenor and with a tiny fraction of the coupon.

The domestic public sector was a growth market in 2016, as cities, cantons and agencies all clamoured to lock in the very low rates at ever increasing maturities. Credit Suisse was on most of them, as well as being instrumental in both the largest public sector deal of the year and the longest. Both of those were from Kanton of Geneva, with SFr400m of April 2036s and SFr200m of October 2056s.

Emerging markets were not left behind either, with the first Argentine corporate in more than two decades, from state-owned oil company YPF. The SFr300m deal was run by Credit Suisse and UBS, with the former on documents for what was a very complex execution due to the Argentine regulatory framework.

Credit Suisse was also sole lead for another debut – Chile’s SME financing group Tanner.

The bank held pole position in the small Swiss franc ABS market, as active manager on all three deals printed in the year. It also remained the only Swiss bank able to both structure and originate ABS deals.

Finally, the market is about to say goodbye to three of the long-standing stalwarts of the Swiss bond market, with DCM’s Daniel Gut, bond syndicate, and DCM’s Andre Schmid, and the unflappable, veritable sage of Swiss deals, Jean Marc Favre on the syndicate desk. All these Credit Suisse veterans are retiring at the end of 2016 or early in 2017.

To see the digital version of this review, please click here.

To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

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