Credit Suisse sold the first covered bond off a new structured Swiss programme today (Wednesday), a CHF250m 10 year deal that comes some five years after its previous programme went virtually dormant.

Credit Suisse (Schweiz) AG this morning sold the CHF250m (EUR225m) 10 year debut, rated AAA by Fitch, at 21bp over mid-swaps, with a zero coupon and zero yield.

The Swiss group previously issued covered bonds via a Credit Suisse AG structured programme from 2010 to 2014, but issuance ceased as the group underwent a legal entity restructuring to comply with local too-big-to-fail regulations, according to Michael McCormick, head of covered bond origination at Credit Suisse.

“As part of this, Credit Suisse (Schweiz) AG was established and the residential mortgage business moved from Credit Suisse AG to the new subsidiary in Switzerland,” he told The CBR. “That required some restructuring of the existing programme and also meant that, because the issuer no longer had the mortgage business, that programme is no longer issuing new series.

“Now that Credit Suisse (Schweiz) AG has that mortgage business, they are looking to diversify beyond the existing funding they have from their deposit base and access to money market and Pfandbriefbank funding with a secured funding programme.”

McCormick said the old programme acted as a starting point for the group, with the new one building upon it.

“Currently Credit Suisse (Schweiz) AG is targeting Swiss franc funding and all the third parties within the programme are located in Switzerland, so naturally it made sense to bring all of the contractual terms of the programme into Swiss law,” he added. “That’s the main difference between the new programmes and the old, which – as you see in other jurisdictions – was a hybrid of local law and English law.”

The issuer is focusing on its local market because the Swiss franc market can absorb its anticipated levels of issuance, according to McCormick, while the programme has been structured without swaps, with the predominantly Swiss franc fixed rate residential mortgages and Swiss franc fixed rate issuance a natural hedge. He said euro issuance is not currently planned by Credit Suisse (Schweiz) AG.

The inaugural issue was sold after investor meetings in Geneva and Zurich and a Credit Suisse spokesperson added that the deal closed quickly and successfully.

Aside from the aforementioned Pfandbriefbank schweizerischer Hypothekarinstitute, which offers a joint covered bond funding option for Swiss commercial banks, and the Pfandbriefzentrale der schweizerischen Kantonalbanken – both of whom issue under Swiss covered bond legislation – the only other Swiss covered bond issuer is Valiant Bank. Valiant also has a structured/contractual programme, which it debuted in November 2017, and focuses on Swiss franc issuance.

Like Credit Suisse, UBS previously had a contractual programme off which it issued internationally, but ceased issuance in 2014.