Credit Suisse’s suspended supply-chain finance funds had $1.2bn of exposure to Sanjeev Gupta’s steel empire, the bank disclosed for the first time on Tuesday, promising that it will consider legal action to protect investors’ interests.
The Swiss lender’s four supply-chain finance funds ran a total of $10bn of assets when they were frozen on March 1. Their suspension helped trigger the collapse of controversial supply-chain financing firm Greensill Capital and left Gupta’s GFG Alliance teetering on the brink of collapse.
As well as the $1.2bn exposure to GFG, Credit Suisse said its funds had $690m of exposure to Bluestone Resources, the coal mining business founded by West Virginia governor Jim Justice, and $440m of exposure to Katerra, a SoftBank-backed US construction group.
The three organisations account for $2.3bn of exposure out of the four supply-chain funds.
The Financial Times has previously reported that Credit Suisse heads had calculated the total losses from the supply-chain finance funds could be as high as $3bn but was more likely to be closer to $1bn and $1.5bn after some money is paid back, other assets are recovered in the courts and insurance pays out.
Credit Suisse’s asset management arm is in discussions with Greensill’s administrators, Grant Thornton, and is “engaging directly with potentially delinquent obligors and other creditors”, the bank said on Tuesday.
It added: “Credit Suisse Asset Management will consider appropriate legal actions to protect fund holders’ interests.”
Credit Suisse also announced it had collected $2bn from the funds’ creditors since the suspensions and was distributing $1.7bn to investors. That takes the total repayment to $4.8bn. More than 1,000 investors are trapped in the funds.
In addition to GFG, Bluestone and Katerra, other creditors are “dragging their heels” on repaying the Credit Suisse funds, a person briefed on the process of recovering the assets told the FT last month
Last week the FT reported that several loans to Liberty Commodities, part of GFG, were based on suspect invoices and that Credit Suisse executives were becoming increasingly concerned that their clients were victims of fraud.
Several European metals businesses told the FT last week that they had not carried out any business with Gupta’s groups, despite invoices linked to them being repackaged as notes by Greensill and sold to Credit Suisse investors.
GFG said last week that “many of Greensill’s financing arrangements with its clients, including with some of the companies in the GFG Alliance, were prospective receivables programmes, sometimes described as future receivables”.
Gupta has also denied that any of his debts to Greensill were due for repayment. It makes “no sense” for any creditors to “destroy jobs but more importantly to destroy value, because that is the value which will give them the recovery”, he said.
Bluestone was one of Greensill’s biggest clients and has said it is “not capable” of repaying the money it owes to the Credit Suisse funds.
Last month Justice, the 69-year-old businessman and Republican politician, launched legal action against Greensill in Manhattan federal court, alleging his coal mining empire was under threat because of its “sudden and unjustified abandonment” by the financing firm.
Credit Suisse executives do not expect to receive up to $440m lent to Katerra. SoftBank pumped money into Greensill last year to cover debts at Katerra, but it did not reach the Credit Suisse funds, the FT reported last month.
Meanwhile on Tuesday influential proxy adviser Glass Lewis advised Credit Suisse shareholders to vote against the re-election of director Andreas Gottschling, who has served as chair of the board’s risk committee since 2018, at the AGM on April 30.
Glass Lewis said the supply-chain finance suspensions and separate losses involving family office Archegos “cast significant doubt on the efficacy of the board’s oversight of the company’s risk and control framework”.
It added: “Shareholders would be warranted to also attribute accountability to the board’s risk committee. As chair of this committee, we believe that nominee Andreas Gottschling holds ultimate accountability at board level.”