Greensill Capital in trouble as Credit Suisse suspends funds

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ZURICH / LONDON (Reuters) – Supply chain finance company Greensill Capital could file for bankruptcy within days, the Wall Street Journal reported Monday after Credit Suisse previously announced it had suspended $ 10 billion in funds Supported the lending operations of the London-based company.

FILE PHOTO: A Credit Suisse logo is pictured on a building in Geneva, Switzerland, November 8, 2017. REUTERS / Denis Balibouse

Greensill, backed by the Japanese Softbank group, has hired Grant Thornton to advise on a possible restructuring, the WSJ said, citing people familiar with the matter and is in talks about the sale of its operations to the private equity giant Apollo.

Greensill and Grant Thornton declined to comment, while Apollo did not immediately respond to a request for comment.

On Monday, Credit Suisse’s asset management arm announced it was halting redemptions of its supply chain finance funds over concerns about their valuation.

Credit Suisse funds invested in Greensill-created supply chain finance securities backed by short-term loans the British company had given companies to help them get the time they had to pay bills to distribute.

In a notice to investors on Monday, Credit Suisse Asset Management announced that “a certain part of the sub-fund’s assets is currently subject to considerable uncertainty as to its precise valuation”.

Greensill spokesman James Doran said in response to the closure of the funds that they are “in advanced discussions with potential outside investors in our company and hope to be able to update this process further shortly”.

Greensill was founded in 2011 by former Citigroup banker Lex Greensill. Its lending model is usually viewed as a relatively low-risk investment, but Greensill has also provided financing to certain borrowers that did not have the supply chain agreements common for this type of loan, showing publicly available borrower accounts.

Still, Credit Suisse marketed the funds partly on the basis of “low risk” investments, saying in January that almost all of the money was insured. Credit Suisse declined on Monday to identify insurers or confirm whether coverage was still in place.

Any existing insurance does not cover all damage.

In the accounts filed in January, Greensill said the insurance policies included first loss clauses, which meant there could be potential losses of up to $ 1.04 billion in the event of default.

Greensill told Reuters in January the probable loss was only $ 59 million.

GUPTA-LINK

The WSJ reported Monday that Credit Suisse was trying to reduce its exposure to Greensill Capital because it had concerns about Greensill’s exposure to metal tycoon Sanjeev Gupta.

Almost since its inception, Greensill has worked closely with Gupta’s UK metals and energy group GFG Alliance, which has helped raise billions to fund the acquisition of Gupta plants around the world.

However, pressure on Credit Suisse to reduce the funds’ exposure to GFG-related loans has increased since the near-collapse of fund manager GAM Holding AG in 2018 after funds related to the purchase of Gupta bonds issued by Greensill were structured, were closed.

GFG declined to comment on the Credit Suisse statement or the WSJ report. She previously said she had met all of the commitments associated with her bond issues.

In 2020, Greensill sued Reuters for defamation over a 2019 article in which Reuters said Greensill made a false statement regarding a Gupta bond. Greensill withdrew the lawsuit after losing an early court verdict.

Reporting by Rachel Armstrong, Silke Koltrowitz and Tom Bergin; Editing by Iain Withers, Louise Heavens, Jan Harvey, and Susan Fenton

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