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Credit Suisse accepts $54 billion lifeline

Credit Suisse

Credit Suisse has moved to halt a decline in investor confidence on Thursday.

The banking giant has opened a 50 billion Swiss franc ($54 billion) credit line with the country's central bank and is offering to buy back debt, as executives and government officials work to try to organize the troubled lender's next steps.

Analysts questioned how much time the announcement had bought, the Swiss Federal Council called a special meeting on Thursday to discuss the situation.

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Concerns about the lender's financial health have roiled global markets in the last 24 hours.

This alarmed regulators in Europe and the United States, and prompted some companies to reconsider their work with the bank.

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Credit Suisse, the government, central bank, and regulator Finma have been in close contact to try to stabilize the bank.

Ideas floated include the separation of the bank's Swiss unit and a long-shot orchestrated tie-up with larger Swiss rival UBS Group AG,

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Sources said it's unclear which, if any, of these steps will be taken.

A source with knowledge of the situation said Credit Suisse has not yet utilized the credit line at the Swiss National Bank.

Chief Executive Officer Ulrich Koerner said in a statement. “These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation

"My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.”

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Nonetheless, JPMorgan Chase & Co. analysts said a takeover of the bank is the most likely scenario.

Credit Suisse proclaimed at least its second debt buyback in just the past six months as it looks to restore investor confidence.

It offered to buy back about $3 billion of its debt in October last year, saying at that time it wanted to “take advantage of market conditions to repurchase debt at attractive prices.”

Ten senior debt instruments valued up to $2.5 billion and four senior debt securities valued up to 500 million euros are included in the most recent tender offer.

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According to the bank, the borrowing is done through covered loan facilities and short-term liquidity facilities, both of which are completely secured by high-quality assets.

Credit Suisse is the second-largest lender in Switzerland, with origins dating back to 1856.

It has suffered over the past few years as a result of a number of blowups, scandals, leadership changes, and legal challenges.

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The bank's second strategy pivot in as many years has so far failed to win over investors or stop client losses, and the company's 7.3 billion franc loss last year erased the profits made over the previous ten years.

Chairman Axel Lehmann had said at a conference on Wednesday that government assistance “isn’t a topic” and the firm’s efforts to return to profitability aren’t comparable to the severe liquidity issues hitting smaller lenders in the US.

Credit Suisse shares initially surged up to 40 percent before paring gains and remaining lower than on Wednesday, when they lost the most since the 2008 financial crisis.

Source:   Bloomberg

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