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DJ Led by 'Mr. SPAC,' Credit Suisse Cashes In on Blank-Check Spree

· 02/05/2021 07:16
By Margot Patrick and Amrith Ramkumar

Credit Suisse Group AG is reaping the rewards from a spree of special-purpose acquisition companies. Leading the charge is a veteran banker who was among the first to bring SPACs to Wall Street 15 years ago.

The Swiss bank was the top underwriter of so-called blank-check firms last year and is second in early 2021, figures from data provider SPAC Research show. Its role in the suddenly booming sector has been a bright spot as the bank took $1.3 billion in unexpected charges last year and weathered a spying scandal and high-profile company frauds.

Spearheading the blank-check business is head of SPACs Niron Stabinsky, who was hired in 2015 from Deutsche Bank AG. He and Credit Suisse have built relationships with some of the most prominent SPAC founders, including venture capitalist Chamath Palihapitiya, veteran deal maker and Vegas Golden Knights owner Bill Foley, and real-estate investor Barry Sternlicht. That group's SPACs helped Credit Suisse bring in seven of the 10 biggest blank-check firms last year, according to Dealogic.

"Niron has become Mr. SPAC," said Mr. Foley, who has worked with him on deals for nearly two decades.

SPACs founded by Mr. Foley and underwritten by Credit Suisse recently agreed to a $7.3 billion merger to take Blackstone Group Inc.-backed benefits provider Alight Solutions public and a $9 billion deal to combine with Paysafe Group Holdings Ltd.

SPACs are shell companies that raise money with the sole purpose of buying a private company to take it public. They have become a popular cash cow for big-name investors and celebrities to access public markets.

The fees bankers can earn throughout the SPAC process make the recent flurry of activity especially lucrative. Banks help set up a blank-check firm when it initially goes public and can also help a SPAC raise money for an acquisition and advise it or a target company on possible mergers. One hundred six SPACs have raised $31 billion in 2021, putting the market on track to shatter last year's record of more than $80 billion, per SPAC Research.

In December, Credit Suisse Chief Executive Thomas Gottstein told investors he wanted to hire more bankers to work on mergers in health care and technology, common sectors for the more than 300 SPACs now looking for private companies. SPACs, IPOs and other share sales last year produced $771 million in revenue at Credit Suisse in the first nine months of 2020, nearly double the total from the same period in 2019.

The bank was involved in another large SPAC this week, when Mr. Sternlicht raised $900 million for his latest blank-check firm, one of the largest deals this year.

Mr. Palihapitiya, a prominent tech investor who has created six blank-check firms, has been key to Credit Suisse's standing in the sector, bankers say. One of his SPACs bought space-tourism firm Virgin Galactic Holdings Inc. in 2019 and another is taking financial-technology company Social Finance Inc. public this year, both well-received deals that made SPACs more popular and lifted Credit Suisse.

"They're perceived as a kingmaker," said Kristi Marvin, founder of data and research provider SPACInsider.com and a former banker. "Anytime they do a deal, people automatically assume it's good quality."

Other banks have thriving SPAC teams too. But blank-check firms are particularly important to Credit Suisse because they represent a proportionally larger chunk of its investment banking revenue, according to analysts. The bank shrunk its presence on Wall Street last decade as it refocused on wealth management for the global rich.

The SPAC business highlights strategic themes Credit Suisse has been pushing. It says ultrawealthy clients want more investment-banking advice to sell companies and raise funding, while rich customers more generally want to replace low-yielding government bonds in their portfolios.

Some analysts say they are wary of risks for investors that may be lurking in the SPAC wave. One concern is that it is easier for a startup to laud its long-term growth forecasts when combining with a SPAC than in a traditional initial public offering. Banks working on the deals also have a lesser role as gatekeepers.

Due diligence was one of Credit Suisse's headaches last year. Luckin Coffee Inc., a Chinese company it helped bring public in 2019, said in April some of its officers fabricated sales, cratering its shares.

Another company, Germany's Wirecard AG, collapsed less than a year after Credit Suisse marketed securities to investors that were tied to the company's shares.

Mr. Stabinsky said the quality of SPAC creators Credit Suisse works with is high. But he too is worried about what might happen if hyped companies fail after merging with blank-check firms.

"I do get concerned that if things go badly, it does have a reputational taint for SPACs," he said.

Write to Margot Patrick at margot.patrick@wsj.com and Amrith Ramkumar at amrith.ramkumar@wsj.com

(END) Dow Jones Newswires

February 05, 2021 07:16 ET (12:16 GMT)

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