UBS Group AG (SIX:UBSG) is considering options to renegotiate parts of a deal that Credit Suisse (SIX:CSGN) Group AG arranged for its securitized products business (SPG) before being acquired by UBS in an emergency takeover, according to sources close to the matter. UBS executives are reportedly dissatisfied with the terms agreed upon by Credit Suisse and Apollo Global Management (NYSE:APO) Inc., particularly concerning the management fees for assets remaining on Credit Suisse's books.
The transaction, which saw Apollo take over significant parts of the SPG business, was part of Credit Suisse's desperate bid to regain investor confidence. As part of the deal, Credit Suisse was expected to finance some assets and retain about $20 billion worth, which Apollo would manage for a fee. However, no decisions have been made on whether UBS will seek formal discussions with Apollo regarding a potential renegotiation.
The SPG deal was a significant part of Credit Suisse's strategy to exit businesses unrelated to its wealth management unit. This decision came under pressure to meet an October 27 deadline for presenting a restructuring strategy aimed at alleviating concerns about the bank's viability. The SPG business involved buying and selling securities backed by pools of mortgages and other assets such as car loans or credit card debt.
In March, following the "substantial first close" of the SPG transaction in February, UBS agreed to acquire Credit Suisse in a government-brokered rescue. This acquisition came after Credit Suisse had paid Apollo hundreds of millions of dollars in upfront fees as part of the SPG deal. UBS is now contemplating all its options, partly due to its role as a distributor of Apollo funds to its clients.
Despite booking an $800 million gain on the sale of SPG, which generated an estimated $20 billion in revenue over the past decade, Credit Suisse faced criticism for a lack of detail in the deal announcement. The bank also committed an undisclosed amount to finance parts of the assets and pay for management fees.
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