The future of Greensill Capital, the financial group advised by former British Prime Minister David Cameron, hangs in the balance after Credit Suisse froze $ 10 billion in funds linked to the company.
The Swiss bank’s move deprives Greensill, which is backed by SoftBank, of a key source of funding. He leaves the London-based group, which in turn is one of metal tycoon Sanjeev Gupta’s biggest lenders, looking for alternatives.
Apollo Global Management is in talks on a potential deal to select some of Greensill’s best assets, according to people familiar with the matter. Such a deal to set up a business to operate Greensill would not include any investment related to Gupta, the people added. The Wall Street Journal reported earlier Monday that the parts of Greensill that Apollo is interested in could bring in $ 100 million.
Greensill specializes in supply chain finance, where companies borrow money to pay their suppliers. It organizes corporate financing either through a bank it owns in Germany, or by grouping these supplier invoices into bond investments for Credit Suisse funds.
Credit Suisse said it had “suspended redemptions and subscriptions” of funds “to protect the interests of all investors”. He added: “A certain part of the [funds’] assets are currently subject to considerable uncertainty as to their fair valuation. ”
Greensill said he recognized “the decision” to “temporarily” suspend funds, adding: “We remain in advanced talks with potential outside investors in our company and hope to be able to keep abreast of this process in such a way. imminent. ”
Credit Suisse’s concerns about funds came to a head as insurance policies covering defaults on part of its assets expired over the weekend, people familiar with the matter said.
The funds were touched by a wave of faults last year, after a series of Greensill clients defaulted on their debts in high-profile corporate collapses and accounting scandals.
Retail investors do not have access to the funds, which are held by high net worth individuals and businesses, including some who use the vehicles to invest in their own debt.
A deal with Apollo could see the U.S. investment group’s insurance subsidiaries, such as Athene, take over some of Greensill’s supply chain finance deals with blue chip companies, a person familiar with said. the subject. Greensill’s clients include Vodafone, and the contracts allow companies to borrow money up front to pay their suppliers, paying back investors later.
Such a deal could separately involve Apollo investing in the operating activities and systems that underpin Greensill’s loans, the person said, adding that Apollo would not take any exposure to Gupta.
Swiss credit launched a review of these arrangements last year, after the FT revealed that SoftBank had poured more than $ 500 million into the funds, which then made big bets on the debt of struggling startups backed by the Japanese tech conglomerate’s Vision Fund.
Credit Suisse funds also have exposure related to Gupta, the industrialist of Indian origin who is one of Greensill’s biggest customers. The German financial regulator BaFin is also pushing a banking subsidiary of Greensill to reduce exposure Gupta’s activities, causing concern at Credit Suisse, according to people familiar with the matter. Gupta’s GFG Alliance declined to comment.
The opaque nature of some of the investments linked to Gupta had made some executives at Credit Suisse nervous, according to people familiar with the discussions. When the FT reported fund accounts last year showing it had loaned $ 74 million to a company that did not exist, Greensill blamed the error on a computer error, attributing the investment to one of Gupta’s companies.
By the end of last year, SoftBank’s Vision Fund had already significantly reduced the value of its exposure to Greensill, according to people familiar with the matter. SoftBank declined to comment.
This is the second time that Greensill-related assets have been at the center of the turmoil in the Swiss fund industry. In 2018, the Zurich-based GAM was forced to liquidate a fund that had invested heavily into illiquid bonds that Greensill had arranged for the Gupta 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 in which his predecessor Tidjane Thiam was ousted over a spy scandal and the bank was hit with suspected frauds against Chinese company Luckin Coffee and German payment company Wirecard.