Credit Suisse Sells $5 Billion of Bonds After Settlement

Credit Suisse Group AG sold $5 billion of bonds, the first benchmark offering since its bank unit pleaded guilty to helping Americans cheat on their taxes.

The Zurich-based bank issued $1.75 billion of three-year, 1.375 percent securities that yielded 60 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The spread was two basis points above where similarly rated Deutsche Bank AG sold $1.4 billion of three-year, 1.35 percent notes today.

The similar yields show that Credit Suisse isn’t being punished in the bond market even after Moody’s Investors Service downgraded its outlook. The ratings company changed the bank’s outlook to negative from stable after Credit Suisse AG agreed to pay $2.6 billion in penalties after pleading guilty in the U.S. tax-probe settlement on May 19, citing “the potential for client defections and lost revenues resulting from the criminal plea.”

Credit Suisse’s $2 billion of 3.5 percent notes due 2015 have decreased 0.1 cent to 102.5 cents on the dollar since the settlement was announced, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Standard & Poor’s ranks Credit Suisse A- and Deutsche Bank one grade higher at A.

‘Financial Impact’

Simon Adamson, a London-based analyst at CreditSights Inc., wrote in a May 20 note that “while the fines are manageable, the financial impact should not be understated.” The fine will reduce Credit Suisse’s common equity ratio, a key measure of financial strength, to 9.3 percent from 10 percent, Adamson said. That’s the lowest among 16 global investment banks tracked by Bloomberg Industries.

Credit Suisse also sold $2 billion in five-year, 2.3 percent notes that yielded 80 basis points more than government securities, and $1.25 billion of three-year, floating-rate securities at 49 basis points more than the London interbank offered rate, Bloomberg data show. The bonds will be used for general corporate purposes.

“Investor demand was very strong, both in terms of size of the order book and number of investors involved,” Tommy Mercein, global head of debt capital markets at Credit Suisse, said in a telephone interview.

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