Pallas Capital Hoses Down Concerns over Credit Suisse Exposure

Pallas Capital says it is “supremely confident” it will not be affected by the UBS buyout of Credit Suisse, a capital backer of the Sydney-based non-bank lender. 

UBS Group has agreed to buy Credit Suisse Group in a historic $4.5-billion, government-brokered deal aimed at containing the banking crisis contagion effect. 

Pallas Capital executive chairman Patrick Keenan said that while they had a plan B in place, he was confident that the Credit Suisse facility would continue, despite uncertainty around aspects of the bank’s business. 

Keenan said they were not pausing on their draw down of the $500-million facility in Australia, and $300-million New Zealand facility. 

“The Credit Suisse facility represents about 15 per cent of our total funding, so it’s been a great product for us but it’s not a big part of the business,” Keenan said. 

“Our Australian facility is about 40 per cent deployed, and our New Zealand facility is about 20 per cent deployed.

“We are supremely confident that this will continue to be a Credit Suisse facility. We have been approached by other global financial institutions to replace Credit Suisse as a Class A Note holder in the PFT.

“People in the industry have known for a while that Credit Suisse was in a tough place.”

▲ A render of the planned Pallas Capital headquarters in Manly, NSW.

The non-bank lender has about $200 million in loans backed by Credit Suisse. 

Keenan said the Pallas Funding Trust No.1 was a conservative loan vehicle that did not have exposure to construction loans and had a maximum loan-to-value ratio of 65 per cent. 

He said Credit Suisse held Class A Notes, and should the bank decide to discontinue the facility, it would be paid out first.

In a statement to investors Keenan said the average term of maturity for loans in the Pallas Funding Trust No. 1– backed by Credit Suisse– was 5.6 months.

“If PFT stopped making new loans its loan book would be returned to cash very quickly,” Keenan said.

“Only six loans out of the current 66 loans are due to be repaid after May 2024; these loans have a total value of $27.5 million.”

The non-bank lender has been aggressive in the market with 389 loans and investments with a total value of $2.9 billion. Keenan said of those loans, 182 investments had been repaid with no loss of capital or interest to our investors.