UBS has agreed to sell $8bn worth of loans to private capital group Apollo as part of a renegotiated deal to hive off a Credit Suisse business that securitised loans for assets such as yachts.
Apollo originally entered into an agreement with Credit Suisse — which was rescued by UBS last year — to purchase its securitised products division in 2022, including a related investment management contract. The reworked deal announced on Wednesday ends that management arrangement.
The agreement is a big boost to UBS ’s ambitions to significantly cut back Credit Suisse’s investment bank as it focuses on building out the combined group’s wealth management business.
“As we execute on our integration plans, this is another example of our relentless focus on working with clients and counterparties to free up capital from non-core activities and reducing costs and complexity,” said UBS chief executive Sergio Ermotti.
The original Credit Suisse deal with Apollo led to the alternative investment manager taking on one of the Swiss bank’s most profitable divisions, but one that required a lot of capital.
The New York-based securitised products business packaged debts, such as mortgages and loans for yachts, before selling them on as securities. The deal allowed Credit Suisse to cut its holdings of such assets from $75bn to $20bn.
Apollo rebranded the business as Atlas. The deal also included an agreement where Atlas would provide investment management services to some of the assets Credit Suisse retained.
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But last year UBS — after it took over its former rival Credit Suisse — set about renegotiating the terms of the Apollo deal, which it felt did not provide good terms for the bank.
This included scrapping the investment management deal, which the Financial Times reported last year. At the time, Credit Suisse said a change to the contract would lead to a $600mn loss for the bank. But on Wednesday, UBS confirmed it would be a $900mn loss.
UBS said the new arrangement with Apollo — which included the transfer of $8bn of senior secured financing facilities — would result in a $300mn net gain for the bank.
Apollo chief executive Marc Rowan said the changes to the deal with UBS were neutral for the firm.
“This caps off a quarter marked by record origination and capital raising for Atlas, where we have generated $24bn originations since inception and have secured capital to support over $40bn of client assets.”