Credit score Suisse has securitised a portfolio of loans linked to its wealthiest clients’ yachts and personal jets, in an uncommon use of derivatives to dump dangers related to lending to ultra-rich oligarchs and entrepreneurs.

The Swiss lender, which has endured a bruising yr marked by repeated scandal, quietly offered on a slice of the danger associated to $2bn of its “ultra-high-net-worth” consumer loans on the finish of 2021.

The securitisation of the portfolio of loans to tycoons and oligarchs backed by their “jets, yachts, actual property and/or monetary property” was made by a unit of the financial institution that has beforehand been plagued with sanctions-related points.

An investor presentation for the deal, seen by the Monetary Occasions, explains that one of many major objectives of this division is to “create a constructive model impression of CS by financing the principals’ favorite enterprise instruments (enterprise jet) and luxurious toys (yachts)”.

Whereas banks frequently have interaction in so-called vital threat switch transactions to scale back the capital they maintain towards loans, the spinoff offers often contain staid company or mortgage portfolios that kind the bread and butter of financial institution lending.

The character of the underlying collateral meant Credit score Suisse needed to supply an eye-watering rate of interest of greater than 11 per cent to entice a handful of hedge funds into the $80mn transaction, a sign of the value the financial institution was prepared to pay to enhance its capital place with out tapping public fairness markets.

The deal’s investor presentation additionally lifted the lid on the Swiss financial institution’s non-public banking division, detailing among the intently guarded enterprise secrets and techniques of its worldwide wealth administration franchise.

One slide revealed that in 2017 and 2018, Credit score Suisse skilled 12 defaults on its yacht and plane loans, with a 3rd of those “associated to US sanctions towards Russian oligarchs”. Press stories on the time indicated that Oleg Deripaska and brothers Arkady and Boris Rotenberg needed to terminate non-public jet leases with the financial institution.

The identical slide defined a rise in defaults on Credit score Suisse’s’s mortgage loans in these years as a result of some purchasers “weren’t notably happy with the financial institution” because it pulled again from sure markets.

Whereas Credit score Suisse has lengthy offered loans to fund billionaires’ non-public jet purchases, its foray into yacht finance is comparatively current. The slides confirmed that it solely started lending towards yachts in earnest in 2014 however has quickly expanded the enterprise, with its excellent loans exceeding $1bn final yr.

The portfolio additionally consists of loans towards rich purchasers’ holdings of shares and bonds, in addition to their holdings in non-public fairness and hedge funds. The slides confirmed that on the latter, the financial institution was typically prepared to supply 80 per cent leverage on their positions, which it acknowledged was “above normal”.

The presentation added that “lending catalysts” for these purchasers can embrace a “change in private state of affairs” reminiscent of a “divorce”.

The $80mn notes are listed on the Worldwide Inventory Change within the Channel Islands, a bourse that earned notoriety for its function within the Neil Woodford scandal however is usually the venue of selection for area of interest debt offers.

Following publication of this text, Credit score Suisse stated in an announcement that the transaction “priced according to different vital threat transactions, provided aggressive funding and hedging phrases for our skilled investor purchasers whereas rising the capital flexibility of the financial institution.”