Credit Suisse grasps for a lifeline

Two things to start: First, former US congressman Barney Frank, an architect of landmark legislation designed to make the banking system safer, has defended his decision to take a job on the board of failed Signature Bank, saying “I need to make some money”. 

Next, payments processing group Stripe has raised more than $6.5bn at about half the valuation it carried two years ago, sealing one of the largest private stock sales in US history.

In today’s newsletter:

• Credit Suisse secures a backstop

• Disney re-evaluates its streaming portfolio

• Exiled Chinese businessman is accused of fraud

Swiss regulators intervene as Credit Suisse wobbles

Credit Suisse on Wednesday was swept up in a brewing banking industry crisis that has felled three large US regional lenders and caused regulators to break the glass and activate emergency measures to ward off a full-blown crisis.

The Swiss lender spent parts of the day appealing to the Swiss National Bank and its local regulator Finma for public support as financial markets began assigning an increasingly dire outlook to its future.

Credit Suisse shares slumped 24 per cent and spreads on its five-year credit default swaps — derivatives that ensure against it missing a payment on its debts — soared to crisis levels.

But by nightfall in Zurich, Credit Suisse had begun discussions with both authorities on measures such as a central bank credit line or asset guarantee to restore market confidence.

The Swiss central bank relented, agreeing to provide a liquidity backstop to Credit Suisse. It insisted there were “no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market”.

Hours before markets opened on Thursday, Credit Suisse said it would tap that facility and borrow up to SFr50bn ($54bn) to strengthen its liquidity.

On a private call on Wednesday, analysts from JPMorgan Chase raised the prospect of the SNB guaranteeing Credit Suisse’s retail and wealth management deposits and forcing it to sell its investment bank, people familiar with the call said.

But the analysts thought the most likely scenario, should Credit Suisse’s situation worsen, would be a sale to local rival UBS, one of the people said. Another possibility would be an equity injection by the SNB, they added.

Ulrich Körner took the helm of Credit Suisse this past July with a bold restructuring plan that involved spinning off its advisory business.

But its unsteady financial footing is threatening to unravel Körner’s efforts as wealthy clients continue to pull their money.

Körner said the bank’s decision to borrow early on Thursday morning demonstrated its “decisive action” and that he was “resolved to move forward rapidly”.

Nonetheless, ratings downgrades hang over the bank, which holds a negative credit outlook and has grown eerily close to junk status in recent years.

Adding to the troubles is the fact that its largest shareholder, the Saudi National Bank, has ruled out providing any additional financial support.

Chair Ammar Alkhudairy said on Bloomberg TV that Saudi National Bank would refuse to invest more money into Credit Suisse: “The answer is absolutely not, for many reasons outside the simplest reason which is regulatory and statutory.”

Credit Suisse’s plunge can also be traced to revelations that its auditor, PwC, had identified “material weaknesses” in its financial reporting controls, which delayed publication of its annual report last week.

One person closely watching the unfolding drama is banker Michael Klein, who is set to lead the new advisory business, called Credit Suisse First Boston, after it merges with his own boutique firm. That’s contingent on Credit Suisse making it to mid-year, when the deal is expected to close.

Klein will receive $175mn selling his operation to the bank. Additionally, a $10mn advisory fee, negotiated when he was still a Credit Suisse board director, also hangs in the balance.

Disney rethinks a Hulu happily ever after

In Hulu’s hit series The Bear, a grieving chef leaves a toxic Michelin-starred restaurant to save his family’s Chicago sandwich shop, neither of which embrace him.

Such is the plight of the streaming service itself, which, despite cranking out hits such as The Handmaid’s Tale and Only Murders In The Building, has struggled to find its place in the streaming landscape.

As the platform’s majority owner, Disney, looks to slim down and refocus on profitability, speculation has intensified that the entertainment giant’s reinstated boss Bob Iger is considering selling it. ESPN, a profitable but declining piece of Disney’s portfolio, could also be up for grabs — though Iger has been more vocal about keeping it.

Hulu launched in 2007 as a joint venture between NBCUniversal and Rupert Murdoch’s News Corp, as the traditional media groups sought to get into the streaming game. Disney bought a stake in Hulu in 2009 and when the Australian media mogul sold his 21st Century Fox empire to the company in 2018, its stake in the streaming service came with it.

Until recently, the assumption across Hollywood and Wall Street was that Disney would soon move to consolidate its ownership of Hulu. In 2019, Disney agreed to take full control of the platform by buying NBC parent Comcast’s 33 per cent stake in the business. That deal allows either Comcast or Disney to force the transaction as early as January 2024 in a sale that would value Hulu at a minimum of $27.5bn.

But as the five-year mark approaches, insiders fret that something else entirely could be in the cards after Iger said “everything is on the table”.

That comment didn’t go down well internally at Hulu, according to employees. “It was an affront,” one executive said. “The takeaway was: He’s selling it.”

Parting with the platform would help Disney focus on family-friendly brands such as Marvel, Pixar, and Star Wars as it tries to lighten its $48bn debt load. But it would also mean sacrificing a formidable player in the streaming game to an up-and-coming rival like NBC’s Peacock.

Comcast chief executive Brian Roberts has said he would be interested in acquiring the business, intensifying the fears inside Hulu that employees could soon have a new owner. Purchasing Hulu outright will nonetheless be a challenge for both companies, given sharply higher interest rates have curbed the investment plans of every major media company.

“We have to get much more judicious in terms of not just how much we’re spending, but what we’re spending it on,” Iger said last week. “It’s just a tricky period of time.”

The many sides of Guo Wengui

Guo Wengui has been called many things, including “honest” and “forthright” by former UK prime minister Tony Blair. But regulators have a different description for the Chinese businessman, singer and conservative political darling: a serial fraudster.

The exiled Chinese businessman was arrested Wednesday on charges including fraud, conspiracy and money laundering. An ally of Steve Bannon, the former White House adviser to Donald Trump, Guo is accused of funding his lavish exile through a string of investment scams.

Prosecutors alleged he engaged in schemes to misappropriate more than $1bn from thousands of his online followers. The money allegedly went to everything from a “citizen journalism” media company, to an elite membership program called G-Clubs, and even a cryptocurrency project called the Himalaya Exchange.

William Je, a Hong Kong and British citizen whom US authorities said was Guo’s financial adviser, was also named as a defendant.

Many of our readers will wonder who Guo is and that’s a good question. No one really knows: he is known by various names, including Miles Guo, Miles Kwok and Ho Wan Kwok.

But if you want some insight into Guo’s lavish lifestyle, we recommend you watch his music video for ‘HCoin to the Moon’.

Job moves

Hedge fund Schonfeld Strategic Advisors has promoted Florida-based John Tompkins to head of US fundamental equity and Russell Hartley and Alex Codrington to co-heads of fundamental equity for Europe, the Middle East and Africa, based in London.

John Lewis Partnership has appointed former Hovis boss Nish Kankiwala as its first chief executive.

Citigroup has hired former Geely Sweden executive and longtime Rothschild & Co investment banker Peter Wikström to help lead its Nordic franchise in Stockholm.

Erin Brown, head of finance for Thomson Reuters’ corporate segment, is stepping down from the board of the London Stock Exchange.

Smart reads

The WestView Coup A succession battle over a tiny independent paper in Manhattan’s West Village has all the intrigue of an HBO corporate drama . . . without the Gulfstreams, The New Yorker writes.

Boxed out The National Basketball Association is on a mission to triple its revenue from TV deals. But Big Tech companies and media groups are resistant, The Information reports.

And one smart listen: Unhedged’s Robert Armstrong joins the FT’s Behind the Money podcast to explain why the collapse of Silicon Valley Bank isn’t a repeat of 2008.

News round-up

Tech start-ups assess damage caused by Silicon Valley Bank collapse (FT)

Raiffeisen seeks to swap €400mn with Sberbank in ‘financial prisoner exchange’ (FT)

Icahn urges Illumina to unwind Grail deal, pushes ahead on proxy fight (Reuters)

Larry Fink raises spectre of ‘slow rolling crisis’ after SVB failure (FT)

T-Mobile scoops up owner of Ryan Reynolds-backed Mint Mobile for $1.35bn (Reuters)

West Virginia governor Jim Justice puts family coal business up for sale (Wall Street Journal)

Charles Schwab: US’s favourite broker is far from broken (Lex)