Greensill left scrambling after Credit Suisse suspends $10bn in funds

The future of Greensill Capital, the finance group advised by former UK prime minister David Cameron, is hanging in the balance after Credit Suisse froze $10bn of funds linked to the firm.

The Swiss bank’s decision deprives Greensill, which is backed by SoftBank, of a key source of funding. It leaves the London-based group, which is in turn one of the biggest lenders to metals magnate Sanjeev Gupta, scrambling for alternatives.

Apollo Global Management is in talks over a potential deal to cherry pick some of Greensill’s best assets, according to people familiar with the matter. Such a deal to carve out a Greensill operating business would not include any investments related to Gupta, the people added. The Wall Street Journal reported earlier on Monday that the parts of Greensill in which Apollo is interested could fetch $100m.

Greensill specialises in supply chain finance, where businesses borrow money to pay their suppliers. It arranges funding for companies either through a bank it owns in Germany or by packaging these supplier bills up into bond-like investments for the Credit Suisse funds.

Credit Suisse said it had “suspended the redemptions and subscriptions” in the funds “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.”

Greensill said it acknowledged “the decision” to “temporarily” suspend the funds, adding: “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’s concerns about the funds came to a head because insurance policies covering defaults in a portion of its assets lapsed over the weekend, said people familiar with the matter.

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.

A deal with Apollo may see the US investment group’s insurance affiliates, such as Athene, take over some of Greensill’s valuable supply chain financing contracts with blue-chip companies, a person familiar with the matter said. Greensill’s clients include Vodafone, and the contracts allow the companies to borrow money upfront to pay their suppliers, repaying investors later. 

Such a deal may separately involve Apollo investing in the operating business and systems that underpin Greensill’s lending, the person said, adding that Apollo would not take on any exposure to Gupta.

Credit Suisse launched a review of these arrangements last year, after the FT revealed that SoftBank had 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 the Swiss bank, said people familiar with the matter. Gupta’s GFG Alliance group declined to comment.

The opaque nature of some of the Gupta-linked investments had made some Credit Suisse executives nervous, said people briefed on the discussions. 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.

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 when 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.