Credit Suisse emerges as the missing piece in the collapsed neobank merger


While details seemed sparse in last month’s sudden disintegration of the proposed merger between neobank American Challenger and Patriot National Bank, one missing piece, according to a court filing, appears to be Credit Suisse.

American Challenger last month sued Switzerland’s second-largest bank and its Cayman Islands branch in New York Supreme Court, accusing Credit Suisse of failing to complete the sale of a portfolio of commercial loans worth $650 million. of dollars.

“Credit Suisse’s decision to flagrantly renege on its written and binding agreement to sell these critical assets to American Challenger [resulted] in the failure of a merger that American Challenger was about to complete,” the neobank wrote in its filing, according to the Cayman Compass.

American Challenger said it believes the commercial loan purchase agreement was reached in January after months of negotiation. As part of the deal, Credit Suisse agreed to sell the portfolio, and American Challenger would have hired employees from Credit Suisse’s subsidiary, Sector Financial, to continue servicing the loans after the sale.

Credit Suisse, however, said it had not received internal approval for the sale. Lawyers for American Challenger founder Felix Scherzer said such an endorsement was a pretense, meaning Credit Suisse is in breach of contract.

“We view this lawsuit as a completely baseless lawsuit and will defend ourselves vigorously,” Credit Suisse said. says

Scherzer was Global Head of Mergers & Acquisitions for Credit Suisse’s Financial Institutions Group from 2015 to 2019.

American Challenger is seeking to recover “hundreds of millions of dollars in damages,” according to the Cayman Compass.

Indeed, the $650 million portfolio would have represented an important pillar of the somewhat complicated merger.

As part of the transaction first proposed in November, Patriot’s holding company would have had to execute a capital raise of at least $875 million. Investors including Oaktree Capital Management and Angelo, Gordon & Co. reportedly provided $540 million for newly issued Patriot stock in exchange for the right to appoint a director to Patriot’s board. Patriot had planned to raise the rest.

Patriot received conditional approval on June 30 from the Office of the Comptroller of the Currency (OCC) to implement American Challenger’s business plan.

The combination with Patriot would have given American Challenger faster access to a banking license. American Challenger filed for federal deposit insurance in November 2020.

A Patriot press release last month said the bank and American Challenger “remain in active discussions regarding a modified transaction,” but “it is uncertain whether a new agreement can be reached.”

American Challenger, in a separate version the next day highlighted his status in the market, saying he was considering selling the business and had hired Citi to advise him. He also teased his “fully developed” brand identity, Cache – with a marketing and launch plan.


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