Swiss Franc Bond House: Credit Suisse

IFR Review of the Year 2015
5 min read
Jonathan Penner

Scaling the Matterhorn

For holding its nerve in a truly challenging year, accurately sensing the direction of the winds of change and even increasing its lead in a difficult market, Credit Suisse is IFR’s Swiss Franc Bond House of the Year.

Just after Coca-Cola stormed the Swiss market with its triple-tranche deal in September, Ben Heck, director of syndicate at joint lead Credit Suisse, jokingly asked if “there is any way IFR can’t give us the award this year”.

The answer, not that we would tell him that at the time, was a resounding “No!”. The deal – Coke’s first in the Swiss market – went down a storm, with all three tranches well bought, and demand on the two-year note such that it printed with a negative yield.

The deal was the pinnacle of what has been a very strange year in the Swiss franc market. The SNB’s decision on January 15 to scrap its defence of a floor against the euro pulled the rug out from under everyone and only the strongest survived the turbulent times that followed.

It was a true paradigm shift. The drop of the floor led to FX moves more violent than many traders will see in any currency – the franc spiked 28% against the euro in intraday trading – while the drop in rates to –0.75% meant larger investors were better off keeping their cash in vaults than putting it on deposit.

The ramifications for the capital markets were equally severe. The basis against US dollars and euros was distinctly unfavourable for much of the year – swaps were negative out to between eight and 10 years and Swiss governments to almost 15-years for most of 2015 – and with the low rates, normal business was difficult or impossible to conduct.

One bank towered over others in meeting the new challenges. Credit Suisse increased its market share in an environment of falling volumes by refocusing its efforts on the issuers that still could print bonds, and even pioneered a new market standard – the Matterhorn Bond.

In the combined market share of international and domestic deals, Credit Suisse took 33.5% of the league table during the awards period, up on the previous year’s 33% take. Of the SFr46.2bn (US$45bn) of bonds sold, the bank was mandated on SFr15.5bn and did 89 of the 155 deals.

“In spite of falling volumes and difficult market conditions, we significantly increased our international market share and enhanced the attractiveness of the Swiss franc market for large corporate issuers,” said Dominique Kunz, head of Swiss DCM at the bank.

Credit Suisse was the leader in bringing the new Matterhorn style bond – that is, international issues over SFr1bn – with deals from Apple, Coca-Cola, Shell and Novartis. It also led in the corporate Triple B and crossover segment with names such as Mondelez and ArcelorMittal.

“The Credit Suisse new issue juggernaut remained active in every single month of the year,” said Daniel Gut, head of fixed income secondary trading.

While others were stagnating or downsizing, Credit Suisse was the only syndicate desk in Switzerland to add headcount, bringing an experienced banker onto the team.

Its focus on North American issuers helped keep the numbers up with large deals. But the bank went a step further, opening the Swiss total loss-absorbing capacity compliant segment with two chunky Credit Suisse holdco bonds totalling SFr1.45bn, and continued to promote the ABS market with Swissauto and Swisscard deals.

Other domestic wins included Novartis’s huge SFr1.375bn deal in early February, as well as good-sized offerings from Kudelski, Temenos, Tradition and Geberit. Credit Suisse was also active in the real estate and healthcare sectors, as well as in “bread and butter” business from Swiss local authorities, including the large SFr950m multi-tranche deal from Canton Basel-Landschaft and the longest regional deal with Canton Solothurn’s SFr300m 1% 2045 deal in February.

Smaller deals were not left out, with “mini-bonds” from City of Koniz, Hirslanden AG and U-Blox.

Credit Suisse was also involved in the only insurance hybrid of the year, from Helvetia, as well as the only international sub-investment grade deal from ArcelorMittal.

The Swiss bank even managed to keep some of the old-style flow business of highly-rated international SSA names going with prints from Kommunekredit, two deals from Land Niederoesterreich, Akademiska Hus and Deutsche Bahn.

Financials also helped boost its profile, with the largest international deal from JP Morgan, the debut from Bank of Nova Scotia and the largest Australian since 2012 from Macquarie Bank.

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Swiss Franc Bond House: Credit Suisse cartoon
Swiss Franc Bond House: Credit Suisse