Credit Suisse suspends $10bn Greensill-linked funds

Credit Suisse has frozen $10bn funds linked to Greensill Capital, adding to pressure on the controversial finance company, which is backed by SoftBank and advised by former UK prime minister David Cameron.

The Swiss bank’s asset management division announced on Monday that it had suspended its supply-chain finance funds, which source all of their investments from Greensill, a London-based group that is one of the biggest lenders to metals magnate Sanjeev Gupta.

Credit Suisse said it had “suspended the redemptions and subscriptions” in these investment vehicles “to protect the interests of all investors”. It added: “A certain part of the [funds’] assets is currently subject to considerable uncertainties with respect to their accurate valuation.”

Credit Suisse’s concerns about the funds came to a head because insurance policies covering defaults in a portion of its assets lapsed over the weekend, according to people familiar with the matter.

Greensill, whose slogan is “making finance fairer”, specialises in supply-chain finance, where businesses borrow money to pay their suppliers.

The company said: “Greensill acknowledges the decision by Credit Suisse to temporarily gate [suspend] the two supply chain finance funds dealing in Greensill-sourced assets.

“We remain in advanced talks with potential outside investors in our company and hope to be able to update further on that process imminently.”

Credit Suisse told the Financial Times that it had suspended all four of its supply-chain finance funds.

The funds were hit by a wave of defaults last year after a string of Greensill’s clients defaulted on their debts in high-profile corporate collapses and accounting scandals.

Retail investors do not have access to the funds, which are owned by wealthy individuals and companies, including some which use the vehicles to invest in their own debt.

Credit Suisse launched a review of these arrangements last year, after the FT revealed that SoftBank had quietly poured more than $500m into the funds, which then made big bets on the debt of struggling start-ups backed by the Japanese technology conglomerate’s Vision Fund.

The Credit Suisse funds also have exposure linked to Gupta, the Indian-born industrialist who is one of Greensill’s largest clients. German financial regulator BaFin is also pushing a Greensill banking subsidiary to reduce its exposure to Gupta’s businesses, sparking concern at Credit Suisse, according to people familiar with the matter.

The opaque nature of some of the Gupta-linked investments had made some Credit Suisse executives nervous, according to people familiar with the matter. When the FT last year flagged fund accounts showing it had lent $74m to a company that did not exist, Greensill blamed the mistake on a computer error, attributing the investment to one of Gupta’s companies.

At the end of last year, SoftBank’s Vision Fund had already substantially marked down the value of its exposure to Greensill, according to people familiar with the matter. SoftBank declined to comment.

This is the second time Greensill-linked assets have been at the centre of turbulence in the Swiss fund industry. In 2018, Zurich-based GAM was forced to liquidate a fund that had invested heavily in illiquid bonds that Greensill had arranged for Gupta’s companies.

Sky News reported earlier this month that Apollo Global Management, one of the most-feared distressed debt investors in the world, could offer a funding lifeline to Greensill, which was founded in 2011 by chief executive Lex Greensill.

However, the $455bn investment giant has not only dismissed the idea of providing equity but also ruled out any deal involving taking on Gupta-linked assets, according to people familiar with the matter.

The suspension is a setback for Credit Suisse chief executive Thomas Gottstein, who told the FT in December that he wanted to start 2021 with a “clean slate” after a turbulent year where his predecessor Tidjane Thiam was ousted over a spying scandal and the bank was hit by alleged frauds at China’s Luckin Coffee and German payments company Wirecard. 

Additional reporting by Kaye Wiggins