The Strategist

Credit Suisse secures billionaires' loans for yachts and planes

02/08/2022 - 06:44

Swiss bank Credit Suisse securitized loans to billionaires for yachts and business jets. It sold some of the risks associated with $2 billion in such loans to hedge funds at the end of 2021, the Financial Times found out.

Swiss bank Credit Suisse securitized a portfolio of yacht and jet loans to super-rich clients, the Financial Times reported, citing a presentation of the deal to investors. The bank used derivatives to reduce the risks associated with lending to billionaires. According to the newspaper, the bank "quietly got rid" of some of these risks at the end of 2021. Credit Suisse declined to comment.

The securitization was carried out by a unit of the Swiss bank, which had previously encountered problems with sanctions against clients. Banks engage in "significant risk transfer" transactions to reduce the amount of capital they set aside (hold) against loans. 

As a result, $80 million worth of debt securities were issued. They are listed on the Channel Islands International Stock Exchange (TISE), which is often the venue for niche debt deals. According to the FT, the bank attracted several hedge funds to the deal, probably offering them a good interest rate on the derivatives - more than 11%. This indicates the price the bank is willing to pay to improve its capital position without using public equity markets, the FT notes.