Credit Suisse loaned Greensill $ 160 million in addition to the fund’s exposure


Credit Suisse has a bigger and broader exposure to Greensill Capital than previously thought, with a $ 160 million loan to the ailing financial firm in addition to an unusual relationship through the management division of assets of the Swiss bank.

In October 2020, the Swiss bank loaned $ 160 million to the Australian holding company of Greensill, according to two people familiar with the matter. They added that the funding was intended to fill a planned capital increase, which the company said last year could double its valuation to $ 7 billion, but did not happen.

Credit Suisse executives are worried about the global fallout from their multiple ties to Greensill, which is backed by SoftBank and advised by former UK Prime Minister David Cameron.

Greensill was plunged into crisis on Monday after Credit Suisse suspended $ 10 billion in funds linked to the company, citing “considerable uncertainties” on the valuation of fund assets. Greensill has since fought for alternative financing, including a possible deal with Apollo Global Management, and in search of protection insolvency laws. On Tuesday, a second Swiss fund manager, GAM, ended its relationship with Greensill.

In addition to investing its asset management clients’ money in assets sourced from Greensill, Credit Suisse also maintains a corporate lending relationship with the finance company itself.

The $ 160 million bridging loan outstanding is now $ 140 million after part is repaid, people familiar with its terms said. Documents at the Maison des Entreprises show the loan is guaranteed by Greensill’s main UK subsidiary.

A person familiar with the facility said that despite the crisis that engulfed the company, the Swiss bank felt it had “sufficient protection” on the loan, even in the worst-case scenario.

Credit Suisse declined to comment. Greensill did not immediately respond to a request for comment.

In addition to supply chain finance funds and bridging lending, company founder Lex Greensill is also a client of Credit Suisse private banking. Greensill, a 44-year-old former Australian banker, cemented his status as a paper billionaire when SoftBank’s Vision Fund paid out $ 1.5 billion in funding in his company in 2019.

Credit Suisse’s multidimensional relationship with Greensill is unusual. While other funds invest in some of the bond-like assets that the finance company creates from corporate invoices, the Swiss bank’s $ 10 billion in supply chain finance funds have secured nearly – all of their assets with Greensill, which is rare in the industry.

The relationship even lasted a high level controversy surrounding SoftBank’s circular investments in the fund last year.

Credit Suisse on Monday launched an effort to “educate” investors about the four supply chain finance funds to explain steps the bank could take to protect them, one of the people said. Retail investors do not have access to funds, which are held by high net worth individuals and companies.

Three of the four funds are fully covered by credit insurance. But policies protecting defaults on some of the assets lapsed over the weekend and some of the rest of the coverage will disappear in the coming months, people familiar with the matter said. They added that although the insurance issue contributed to the decision to stop the funds’ original new paper, the policies should still cover its existing assets.

The funds are invested in bond-like assets that are repaid when a company honors invoices from its suppliers or when its corporate clients pay invoices owed to the company. Last year, several default values in the funds were covered by insurers and Greensill itself.

The fund’s end borrowers include companies linked to Sanjeev Gupta, the industrialist of Indian origin who is one of Greensill’s biggest customers.

Since Credit Suisse froze the funds, Greensill has applied for protection against the Australian insolvency regime. The company is hoping to invoke “safe haven” protection in Australia, which protects directors from the personal liability of a company that negotiates while it is insolvent, according to people familiar with the matter.

While the bulk of Greensill’s business is based in London, its parent company is registered in the Australian town of Bundaberg, the hometown of its founder Lex Greensill.

Greensill said the idea for his supply chain finance company was shaped by growing up on a watermelon farm, where his family endured financial hardship when large companies delayed payments.

Additional reporting by Jamie Smyth in Sydney and Laurence Fletcher in London


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