Credit Suisse investment banking head Michael Klein is expected to lay out the plans for CS First Boston at a meeting of bankers this week.

Senior Credit Suisse bankers will learn in New York this week what plans Michael Klein has in store for the spun-off CS First Boston, what business areas will be included, and plans to secure capital, according to a report from «Reuters» on Friday citing people familiar with the matter.

Klein's sale of his eponymous business to Credit Suisse for $175 million was formalized earlier this month.

Show me the Money

One question facing Klein will face is where the money to fund the business and provide capital for dealmaking will come from, according to the report. This is a critical question in times of fewer mergers and IPOs.

Several sources which «Reuters» spoke to said investment bankers were unsure where Klein will get the funds to get the business started. One option is a $500 million exchangeable bond to help fund the operations. In October, Credit Suisse CEO Ulrich Koerner said there was a $500 million commitment from a yet unnamed investor. 

According to the terms of the bond, investors have to exchange that into CSFB stock if there is an IPO or sale of the firm, which is something investors are viewing as lukewarm. According to terms seen by «Reuters», in the current structure, investors have to convert the bond holdings when CSFB is spun off. 

One source familiar with the terms told the news outlet investors preferred having the option of converting the holdings into stock.

Apollo Capital Infusion?

Last week, reports emerged that Apollo Global Management was in talks with Credit Suisse to fund its leveraged finance business for $750 million. So far the two sides have not reached an agreement.

All this comes at a time when experienced bankers are leaving Credit Suisse. To try and stop the exodus, Credit Suisse is paying bonuses to its junior bankers in installments. At the same time, Klein is also trying to recruit top dealmakers to CSFB. 

Equity Research

To help bankers make pitches to clients, and IPOs in particular, incorporating the Swiss bank's equity research into CS First Boston is under consideration.

The move is similar to one made by Deutsche Bank in 2019 when it underwent reorganization and got out of the equities trading business but kept its equity research. 

Massive Losses and Outflows

Earlier this month Switzerland's second-largest bank reported a net loss attributable to shareholders of 7.29 billion Swiss francs ($7.92 billion) for 2022. Perhaps even more ominous were client outflows of 123.2 billion francs last year, of which 110.5 came in the fourth quarter, the bulk of which came out of its wealth management business.

A Credit Suisse spokesman declined to comment to Reuters, as did a representative for Klein. Credit Suisse announced last October that its merger advisory and risk lending businesses would be transferred to CSFB, while the bank would retain some securities trading activities, including equities.