Credit Suisse asks investors to destroy oligarchs’ loan documents
Credit Suisse has asked hedge funds and other investors to destroy documents relating to the yachts and private jets of its wealthiest clients, in a bid to prevent the leak of information about a bank unit that granted loans to oligarchs which were then sanctioned.
Investors this week received letters from the Swiss bank asking them to destroy documents relating to a securitization of loans backed by “jets, yachts, real estate and / or financial assets”, according to three people whose firm received the request .
The letters tell investors to “destroy and permanently erase” any confidential information Credit Suisse has previously provided in relation to the transaction, citing a “recent data leak to the media” which it says has been “verified by our investigators.
Credit Suisse took action after a Financial Times report last month detailing how it offloaded risk on $2 billion in loans to a group of hedge funds.
The FT report quoted extensively from the investor presentation of the deal, which lifted the lid on the closely guarded trade secrets of the bank’s international wealth management franchise.
A slide revealed that a third of defaults on its yacht and aircraft loans in 2017 and 2018 were “related to US sanctions against Russian oligarchs”. News reports at the time indicated that Oleg Deripaska and brothers Arkady and Boris Rotenberg had to terminate private jet leases with the bank during those years.
The Credit Suisse letters were sent for a week as the US, UK and EU unleashed a new wave of sanctions against Russia over its invasion of Ukraine.
“I don’t think we’ve ever received a request like this,” said an investor who received the letter, noting that his company only received similar notices when it accidentally received confidential documents.
Credit Suisse declined to comment.
The attempt to prevent clients from divulging confidential information came after Credit Suisse was also hit by an extraordinary leak of documents detailing the accounts of 30,000 of its clients. The so-called ‘Swiss Secrets’ newspapers have lifted the veil on Swiss banking secrecy, exposing the lender’s ties to oligarchs, corrupt officials and drug traffickers.
Credit Suisse quietly completed the jet and yacht securitization deal at the end of 2021, offering an annual interest rate above 11% to lure a handful of hedge funds into the deal.
The structure of the deal protects Credit Suisse from the first 4 percent of portfolio losses, which are instead carried by the funds. This means that only a small number of defaults by the bank’s customers could wipe out their $80 million investment.
Several investors who passed on the deal said their concerns about the deal had only intensified after the recent round of sanctions imposed on Russian oligarchs.
Switzerland announced on Monday its intention to match EU sanctions against Russia, breaking with its long tradition of political neutrality.
The presentation to investors on the securitization operation is oblique on the geographical distribution of ultra-rich clients of Credit Suisse.
A slide notes that its reaction loan portfolio had shrunk since 2016 “due to stricter underwriting principles and uncertainties” in regions such as “North Asia.” While the term North Asia usually refers to parts of Russia, a person familiar with the deal said Credit Suisse uses it to refer to China and Hong Kong.
The documents also say the portfolio excludes any borrower on Credit Suisse’s internal “watch list” or already under management by its “collections team.”