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Credit Suisse Group places 7.875% Tier 2 Buffer Capital Notes

Credit Suisse Group today placed a 'Regulation S-only' issue of USD 2 billion 7.875% Tier 2 Buffer Capital Notes due 2041 (Tier 2 BCNs). The Tier 2 BCNs will be issued by Credit Suisse Group (Guernsey) I Limited, and guaranteed on a subordinated basis by Credit Suisse Group.

The Tier 2 BCNs are high-trigger contingent capital, expected to count towards the capital buffer that will be required of large Swiss banks under proposed Swiss capital adequacy regulations. Credit Suisse Group worked closely with its primary regulator, FINMA, and the Swiss National Bank to agree the terms of the BCNs. Together with the forward private placement of Tier 1 BCNs to Qatar Holding LLC and The Olayan Group that was announced on February 14, 2011, this Tier 2 BCN offering means that Credit Suisse Group has already secured more than 70% of its maximum potential issuance of high-trigger contingent capital suggested under the proposed Swiss regulations.

The Tier 2 BCNs were offered on a ‘Regulation S-only’ basis outside the US and other restricted jurisdictions in a minimum denomination of USD 100,000. The USD 2 billion Tier 2 BCNs will initially carry a coupon rate of 7.875% per annum. Further key terms are summarized below.

Commenting on the issue of Tier 2 BCNs, Brady W. Dougan, Chief Executive Officer of Credit Suisse Group, said: “We are pleased to have successfully completed this next step in our capital plan to transition to the new Swiss regulatory standards well ahead of time. We have, for some time now, supported the advent of contingent capital in Switzerland and we are pleased to contribute in this practical way to international debate on its role and feasibility.”

Key terms
The Tier 2 BCNs are subordinated notes with a 30-year maturity and may be redeemed by the issuer at any time from August 2016. The initial coupon is reset every five years from August 2016. Interest payments will not be discretionary or deferrable. The BCNs will be converted into Credit Suisse Group ordinary shares if the Group’s reported consolidated risk-based capital ratio, at the end of any calendar quarter, is below 7%. The BCNs will also be converted if FINMA determines that Credit Suisse Group requires public sector support to prevent it from becoming insolvent, bankrupt or unable to pay a material amount of its debts, or other similar circumstances. If converted, the BCNs will convert into Credit Suisse Group ordinary shares at their prevailing market price over a 30-day period preceding the notice of conversion, subject to a minimum price of USD 20. The Tier 2 BCNs are expected to carry a rating of ‘BBB+’ from Fitch Ratings and to be listed on the Euro-MTF exchange.