Credit Suisse Securitizes Yachts With Derivatives

Credit Suisse used complex derivatives to offload the risks of billions in loans to oligarchs and tycoons to hedge funds.

Credit Suisse securitized a portfolio of loans linked to the yachts and private jets of its wealthiest clients using derivatives, allowing the bank to offload the risks from lending to ultra-wealthy oligarchs and entrepreneurs. The loans amounted to about $2 billion.

The securitization was handled by a unit in the bank which had been sanctioned previously. Due to the unusual collateral underlying the securitization, it offered an interest rate of more than 11 percent to attract hedge funds to the $80 million transaction, the report said, citing an investor presentation.

The presentation revealed that a third of the 12 defaults on its yacht and aircraft loans in 2017 and 2018 were related to US sanctions against Russian oligarchs. Earlier press reports said that oligarchs Oleg Deripaska and brothers Arkady and Boris Rotenberg had to cancel their private jet leases with the bank.

The Swiss bank, which only began lending to yachts in 2014, has expanded the business with outstanding loans topping $1 billion last year.

In a statement sent to finews.com,  Credit Suisse said:  This synthetic risk-weighted asset transfer, which priced in line with other significant risk transactions, offered competitive investment and hedging terms for our professional investor clients while increasing the capital flexibility of the bank.