Saudi Arabia’s crown prince and a US private-equity firm run by Barclays’ former chief executive are among investors preparing to invest $1bn or more into Credit Suisse’s new investment bank, people familiar with the matter said.
Crown Prince Mohammed bin Salman is considering an investment of around $500m to back the new unit, CS First Boston, and its CEO-designate, Michael Klein, some of the people said. Additional financial backing could come from US investors including veteran banker Bob Diamond’s Atlas Merchant Capital, people familiar with that potential investment said. Credit Suisse previously said it had $500m committed from an additional investor it hasn’t named.
Credit Suisse has received a number of proposals from investors interested in CS First Boston. Credit Suisse chair Axel Lehmann at a conference on 1 November said it has other firm commitments in addition to the $500m from the unnamed investor. The bank hasn’t received a formal proposal from any Saudi entity, some of the people familiar with the matter said.
Credit Suisse is spinning off the New York-based investment bank as part of a fresh start after being buffeted by scandals, regulatory scrutiny and steep losses. It is raising $4.2bn in new stock that separately will make Saudi National Bank its largest shareholder. It isn’t clear if Prince Mohammed would make the investment through that bank, or another investment vehicle. He is chair of the country’s sovereign-wealth fund, Public Investment Fund, which along with another government fund is Saudi National Bank’s main owner.
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Credit Suisse’s stock scraped lows in recent days from the new share sale and a warning from the bank that customers pulled $88.3bn in investments and deposits. The stock rebounded 9% on 2 December following comments by Lehmann that the outflows largely stopped.
Separating CS First Boston would give it a clean balance sheet and move it beyond Credit Suisse’s wider losses and thorny legal issues. Many of its bankers defected to rivals this year. Those staying are being promised a share of profits through a partnership model. The name revives the First Boston brand that made Credit Suisse a force on Wall Street after expanding beyond Switzerland in the 1970s, with Diamond among its alumni. Analysts say the separation could be lengthy and complex.
Klein is to lead the new firm after a career as one of the world’s most sought-after deal makers for companies and investors. As a Credit Suisse board member since 2018, he led a review of the investment bank’s strategy over the summer, then got tapped by the bank’s other board members to run the spinoff.
Making CS First Boston independent could take around two years, Lehmann said on 1 December at the FT Global Banking Summit. He said its balance sheet, structure and governance are being discussed with the Federal Reserve.
Klein’s involvement opened the door to Prince Mohammed’s potential investment, people familiar with the talks said. Klein is a trusted adviser in the kingdom from deals such as the 2019 initial public offering of state-owned oil giant Saudi Arabian Oil.
Prince Mohammed has encouraged Saudi investment into businesses as diverse as electric-vehicle manufacturer Lucid Motors, Twitter, Uber Technologies, Citigroup and the Premier League soccer club Newcastle United, making the kingdom an increasing force in the US and globally.
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Saudi National Bank is to become Credit Suisse’s largest shareholder with a 9.9% stake through the $4.2bn stock sale being completed this week. Chairman Ammar al-Khudairy said the investment would foster deal-making and bring more banking know-how to the country, and that it might invest in CS First Boston too.
Atlas Merchant’s potential investment was first reported by Global Capital. The private-equity firm typically forms consortia with other investors to buy stakes in financial companies.
While at Barclays, Diamond tapped Klein for advice in taking over US operations of Lehman Brothers, a complex carve-out similar to the one going on at Credit Suisse. An Atlas Merchant operating partner, Tom King worked with Klein at Citigroup.
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This article was published by The Wall Street Journal, part of Dow Jones