Credit Suisse becomes first to reference SARON with Tier 1

IFR 2298 31 August to 6 Septembert 2019
Quick read

Credit Suisse Group AG took advantage of unprecedentedly low rates and the hunt for yield to print the largest Tier 1 CoCo in the Swiss franc, and the first deal in the currency to benchmark against the upcoming SARON reference.

The SFr525m perpetual non-call 6.25 Tier 1 issue started on Wednesday morning with IPTs at 3%–3.25%, before books opened for a minimum SFr250m at a 3% coupon and yield.

A final book of SFr525m with 81 top-line accounts (fronting a much larger number of private wealth clients) saw the bonds sized to demand, with an initial and reset spread of swaps versus SARON+395.7bp, equivalent to swaps versus Libor+387.2bp.

That level was in line with Credit Suisse’s recent US dollar Tier 1, and around 45bp wide of its Swiss franc bonds, both of which are illiquid and trading well over par.

The first call is in November 2025, long after Swiss Libor is retired in favour of SARON. As such, the bonds will reset versus SARON, although the current Libor mid-swap rate was released for comparison.

Private banks and retail took almost two-thirds of the paper, with a solid institutional bid from asset managers with 22.56% and pension funds with 10.53%. Insurers took only 0.62%.

The bonds will be rated BB–/BB by S&P/Fitch.

Although official denominations were 5k, Credit Suisse had an informal agreement to set a minimum 50k sale with its managers and investors.

A permanent writedown will be triggered if the group’s CET1 ratio falls below 7%.

Credit Suisse was sole bookrunner.