Credit Suisse panel to review Spac deals as SEC rules loom

Bloomberg

Credit Suisse Group AG has formed a new committee to assess its involvement in blank check-firm mergers as underwriters face the prospect of heightened liability under proposed financial regulations,
according to a person with knowledge of the matter.
The Swiss lender told staff in a memo that the “tactical deSPAC committee” will focus on pending mergers involving US special purpose acquisition companies, said the person, requesting anonymity discussing the move. Any transaction must be approved by both the new committee and the company’s investment banking committee, the person said.
The bank’s move comes in the wake of rules covering SPAC deals proposed recently by the Securities and Exchange Commission. The deSPAC committee includes global head of equity and debt capital markets David Hermer, Spac chief Niron Stabinsky, Harold Bogle, chairman of investment banking and capital markets; and ECM managing directors Frank McGee and Conrad Rubin. In a deSPAC transaction, a Spac merges with a target business or businesses.
Credit Suisse has worked on IPOs that raised over $45 billion for more than 100 US-listed SPACs since the start of 2020, according to data compiled by Bloomberg. A bank spokesman has declined to comment.
Wall Street banks have been quick to take heed of the SEC’s rule-making efforts. The regulator’s proposal “that sent the biggest shock waves through the market” is its potential to define a Spac IPO underwriter as an underwriter in a deSPAC, which could leave it subject to liability, according to law firm Morrison & Foerster.
“Underwriter liability is more than participants in Spac transactions expected, and may lead some newly deemed ‘underwriters’ to question if participating in the Spac process is worth the risk,” MoFo partners wrote in a memo.
The law firm said some banks have reacted to the rules with preemptive actions, including suspending participation as Spac IPO underwriters or placement agents; terminating PIPE placement agent mandates; and waiving entitlement to deferred IPO fees.
Banks exposed to underwriter liability “will want to conduct robust due diligence akin to that of more traditional IPOs and surely will want to be compensated accordingly,” the partners wrote. That may add time to a deSPAC merger, prompting “unintended consequences” for SPACs, which typically set deadlines for deal completion.