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Credit Suisse Raises $4.3 Billion Capital After Wild Ride

(Bloomberg) — Credit Suisse Group AG completed a 4 billion-franc ($4.3 billion), two-pronged capital increase, giving Chief Executive Officer Ulrich Koerner the funds needed to embark on a comprehensive restructuring of the troubled lender.

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Investors agreed to buy 98.2% of the stock on sale in a rights offer to raise 2.24 billion francs, Credit Suisse said in a statement late Thursday. The remainder of the stock will be sold in the market at or above the offer price of 2.52 francs a share.

The rights issue was the second leg of the bank’s capital raising. The Zurich-based firm already raised 1.76 billion francs through a private placement last month to investors including Saudi National Bank, which will become the largest shareholder with just under 10%.

The stock gained about 3.5% in early Zurich trading on Friday.

Credit Suisse is shoring up its finances to assuage investors’ concerns after billions in losses over the past two years, recent client defections and asset outflows. The funds will help pay for the exit from large parts of its investment bank and 9,000 job cuts. Reeling from years of scandals and missteps, Credit Suisse has warned of a fifth straight unprofitable quarter.

The concluded rights offer spells the end of a wild ride for the troubled Swiss bank’s stock over the past weeks, when at one point a 13-day losing streak took the shares near the price of what was supposed to be a heavily discounted offer. Comments by Chairman Axel Lehmann on Dec. 2 that the bank had stopped massive outflows provided some relief.

“The successful completion of the capital increase is a key milestone for the new Credit Suisse,” Koerner said in the statement. “It will allow us to further support our strategic priorities from a position of capital strength and create a simpler, more stable and more focused bank built around client needs.”

A rights issue is an offering of shares to existing investors to allow them to buy shares in proportion to their holding at a discounted price. Taking up the rights compensates investors for the dilution that occurs in a capital raising.

Last week, the shares fell to a record low of about 2.67 Swiss francs, just above the price of 2.52 francs for subscription rights that Credit Suisse offered existing investors. The bank had set the price at a discount of about 32% to its stock value after the strategy presentation in October.

The bank said the rights offer will strengthen its CET1 ratio, a key metric of financial strength, by about 140 basis points. It also said cost savings measures it’s already started represent about 80% of the planned 1.2 billion francs reduction in its 2023 cost base.

The rights issue was fully underwritten by about 20 banks led by Deutsche Bank AG, Morgan Stanley, RBC Capital Markets and Societe Generale SA.

(Updates with shares in fourth paragraph)

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