Apollo Global Management and Pimco have teamed up and are close to acquiring Credit Suisse’s securitised-products group as the Swiss bank prepares to significantly downsize its operations in the US, according to people briefed on the talks.
The sale of the unit is expected to be announced at Credit Suisse’s strategy update on Thursday, the people added. The Swiss bank is also planning to sell several other assets, including parts of its domestic bank, as it attempts to close a capital hole of about SFr4.5bn (US$4.5bn).
The New York-based securitised products business — which packages debts like mortgages and loans for yachts before selling them on as securities — would reduce capital burdens on Credit Suisse’s balance sheet but also sever one of the bank’s most profitable business lines.
The Wall Street Journal reported the talks earlier on Wednesday. Apollo and Pimco declined to comment.
Credit Suisse’s board and management decided the unit required too much capital and had little overlap with its private wealth business, which will become the bank’s core focus after the strategic review.
If agreed, the deal would further underscore the increased presence of private capital groups in many of the most lucrative if risky areas of lending. These firms have started building large internal underwriting operations that originate asset-backed loans to feed into their life insurance and annuities businesses.
Apollo, for instance, has originated more than $100bn in loans directly over the past 12 months, much of them through its own lending operations spanning equipment finance, mortgages and mezzanine real estate loans.
By originating assets directly, Apollo and Pimco are trying to ensure they have a steady source of credit investments as well as a good sense of the quality of the paper they are selling on to their investors.
Private credit firms have been stepping in to a void created over the past 15 years as European banks retreat from once prized areas of business to deal with losses from the financial crisis, regulatory changes, and what was until recently a long era of low interest rates.
As bank lending has become more constrained, many European companies have turned to alternative sources to fund their operations.
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