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Credit Suisse turns back on distressed debt

 Credit Suisse is exiting distressed debt as it attempts to make savings of SFr4.3 billion by 2018. 

Swiss-based global investment bank Credit Suisse will no longer invest in distressed debt as part of a wider plan to cut losses at the bank.

The bank’s existing book of investments will be sold and a spokeswoman confirmed to PDI that the bank expects a loss on the back of the disposals. 

The bank confirmed yesterday (24 March) that the planned withdrawal from the distressed debt market is in a bid to save SFr4.3 billion ($4.4 billion; €3.95 billion) by 2018. An earlier targeted for savings of SFr 3.5 billion has been revised upwards. The bank also aims to cut SFr1.7 billion in costs by the end of this year.

The bank’s distressed debt portfolio is managed by Credit Suisse Asset Management. It invested in distressed assets of corporates in the media/telecommunications, financial services, gaming, housing and energy sectors, according to the bank’s fourth quarter 2015 results presentation. 

Credit Suisse told PDI that its decision to exit distressed debt should come as no surprise to the market. The bank has been offloading assets from its distressed book since October and has reduced the size of its portfolio from $2.9 billion to $2.1 billion, with gross write-downs of $99 million. The bank’s CLO assets have reduced from $800 million to $300 million.

Tidjane Thiam, Credit Suisse chief executive, said that it is set to cull 6,000 jobs as part of the disposals and savings drive, with almost 2,800 staff already let go so far this year. “We are exiting activities that are not consistent with our new strategy,” said Thiam in a statement.

In December, Robert MacNaughton left his role as head of distressed debt trading at the bank after 15 years at the Swiss bank.

Credit Suisse was established in 1856 and is headquartered in Zurich. It operates in more than 50 countries. Credit Suisse Asset Management manages regional and global portfolios, as well as mutual funds and other investment vehicles for governments, institutions and corporations.