Credit Suisse’s controversial funds tied to Greensill Capital failed to receive an emergency cash injection from SoftBank late last year, deepening the problems now facing the Swiss bank’s clients.
SoftBank agreed to pump money into Greensill to cover debts at troubled US construction company Katerra, one of the biggest holdings in the Swiss lender’s supply chain finance funds, according to people familiar with the matter.
However, the funds, now at the centre of a deepening scandal for Credit Suisse, still contain Katerra debts even after SoftBank advanced the money to Greensill, according to documents seen by the Financial Times and confirmed by people familiar with the matter.
SoftBank first invested in Katerra through its $100bn Vision Fund in 2018. The construction group was also a client of Greensill, which advanced companies funding linked to invoices in return for a fee. Greensill would then sell those Katerra loans, along with many others, to outside investors, chiefly Credit Suisse.
The Katerra development suggests that the exposure of the $10bn Credit Suisse funds to SoftBank-linked companies may prove more problematic than originally feared. Greensill sourced all of the assets that went into the funds, including numerous debts from companies in SoftBank’s Vision Fund.
The Swiss bank’s decision this month to freeze the funds hastened the demise of Greensill, which filed for administration last week. Founded by Australian financier Lex Greensill, the company was targeting a $7bn valuation only months ago and counted former British prime minister David Cameron as an adviser.
Katerra has never been listed by name in the Credit Suisse funds’ filings because the debt was channelled through an investment vehicle called “Fairymead”, according to documents seen by the FT. The vehicle took its name from a sugarcane plantation in Lex Greensill’s hometown of Bundaberg.
Filings show that Credit Suisse’s main supply-chain finance fund still had more than $100m of Fairymead debt at the end of January, one month after SoftBank’s capital injection, making it the $6.8bn fund’s 10th largest exposure. Fund documents from last year show that a smaller fund that could invest in riskier assets also had exposure to Katerra.
As Katerra’s problems escalated in December, Greensill agreed to write off debts it was owed by the US construction group in return for taking a small equity stake. In turn, SoftBank injected cash into Greensill to cover the losses. At the time Katerra’s chief executive Paal Kibsgaard put the debts at about $435m.
In a statement, Credit Suisse said: “Wherever there is evidence of fraud or malpractice that impacts investors in the supply chain finance funds, CSAM will consider appropriate legal action.”
Greensill and SoftBank declined to comment.
Credit Suisse launched a review of its supply-chain finance funds last year after the FT revealed that SoftBank had quietly poured its own money into the investment vehicles, which then made circular bets on the debt of struggling start-ups backed by its Vision Fund.
In July 2020, the bank told its clients that it intended to update the funds’ investment guidelines to reduce their maximum exposure limits to a single company, including “those backed by the Vision Fund”. Despite the proposed overhaul, the investment vehicles continued to invest heavily in technology companies backed by SoftBank.