On January 30, 2017, Credit Suisse Group AG issued USD 1,500,000,000 aggregate principal amount of 7.125 per cent. Perpetual Tier 1 Contingent Convertible Capital Notes (the Contingent Convertible Notes), followed by the issuance of CHF 200,000,000 3.875 per cent. Perpetual Tier 1 Contingent Write-down Capital Notes (the Write-down Notes) on March 20, 2017. Both the Contingent Convertible Notes and the Write-down Notes are "high trigger" regulatory capital instruments that are eligible to fulfill Credit Suisse Group AG's Swiss going concern requirements.
The Contingent Convertible Notes are the first regulatory capital instruments that are contingently convertible into shares of Credit Suisse Group AG that have been issued by Credit Suisse under the recently revised Swiss Capital Adequacy Ordinance, and are the first instruments of this kind that have been directly issued by Credit Suisse Group AG. In the past, due to the imposition of Swiss withholding tax on issuances of bonds by Swiss-domiciled issuers, such instruments have been issued by a special purpose vehicle subsidiary of, and guaranteed by, Credit Suisse Group AG. However, Credit Suisse Group AG is now able to take advantage of an exemption to Swiss withholding tax available for bonds that qualify as additional tier 1 capital, and directly issue additional tier 1 capital instruments, such as the Contingent Convertible Notes. The Contingent Capital Notes were offered outside of the U.S. in reliance on Regulation S under the U.S. Securities Act, and are cleared through SIX SIS Ltd. and traded on the SIX Swiss Exchange.
The Write-down Notes constitute Credit Suisse's first externally issued high-trigger regulatory capital instruments with a contingent write-down feature, rather than a contingent conversion feature. As is the case for the low-trigger regulatory capital instruments with a write-down feature that Credit Suisse previously issued for purposes of fulfilling the former progressive component requirements under Swiss law, the Write-down Notes feature a full contractual write-down if (among other events) Credit Suisse Group AG's consolidated common equity tier 1 capital falls below a defined percentage of its consolidated risk weighted assets (a so-called "Contingency Event"). However, in order to meet the Swiss regulatory requirements in force since July 1, 2016, the threshold triggering such a write-down of the Write-down Notes has been set at a higher percentage (i.e., 7 per cent. of consolidated risk-weighted assets). This means that, in the case of the occurrence of a Contingency Event, the Write-down Notes will be fully written-down prior to, or at the latest concurrently with, Credit Suisse's outstanding low-trigger regulatory capital write-down instruments. Since the Write-down Notes are eligible to fulfill Swiss going concern requirements, they also qualify for an exemption from the Swiss withholding tax that would normally be applicable to bonds directly issued by the Swiss-domiciled Credit Suisse Group AG. The Write-down Notes were publicly offered only in Switzerland in reliance on Regulation S under the U.S. Securities Act, are cleared through SIX SIS Ltd. and are traded on the SIX Swiss Exchange.
Homburger advised Credit Suisse with respect to all aspects of Swiss law.
The Homburger team was led by partner René Bösch (Financial Services) and included partner Dieter Grünblatt (Tax), counsel Lee Saladino and associates Benjamin Leisinger and Andreas Josuran (all Financial Services), as well as paralegal Susanne Leisinger (Corporate | M&A).
