West Virginia governor offers $300m to settle Credit Suisse debt

Credit Suisse Group AG updates

West Virginia governor Jim Justice has proposed paying Credit Suisse $300m and offering half the proceeds from the sale of his mining business to settle debts owed to the bank’s Greensill Capital-linked supply-chain finance funds.

Bluestone Resources, the coal mining empire run by Justice, borrowed heavily from Greensill, the finance firm whose collapse in March sparked a lobbying scandal in the UK and damaged the reputation of Credit Suisse.

Greensill had lent $690m to Bluestone from money raised through the Credit Suisse funds. Bluestone last week wrote to Credit Suisse with the proposal to settle the debts, which was first reported by the Wall Street Journal.

In the letter, Bluestone said it was negotiating a $300m refinancing deal from an unnamed party and would pay the money to the Credit Suisse funds, according to people with knowledge of the letter.

The offer also included half the proceeds, net of any debt, of a future sale of Bluestone, though the letter did not contain details about whether such a transaction was imminent.

A person familiar with Credit Suisse executives’ thinking on the proposal said they would consider opening talks over a deal, but there was scepticism whether the refinancing could be achieved and what value would be left in the business.

Credit Suisse announced on Monday that a further $400m would be repaid to the 1,000 wealthy clients trapped in the supply-chain funds, bringing the total returned to $6.3bn out of the $10bn held in the funds when they were suspended in March.

Bluestone was one of three creditors to the funds — including Sanjeev Gupta’s GFG Alliance and collapsed US construction company Katerra — that Credit Suisse identified as being problematic. The trio collectively owe the Credit Suisse funds $2.3bn.

“Credit Suisse Asset Management is doing everything we can to maximise recovery for our fund investors,” said the bank. “If outstanding debtors put proposals to us, we will of course look at them.”

A spokesperson for Justice did not respond to a request for comment by the time of publication.

Bluestone and its related companies had become one of Greensill’s biggest clients before its spectacular collapse, with the finance firm arranging corporate funding linked to invoices from the coal miner.

Greensill had a partnership with Credit Suisse, which repackaged the debt and sold them to investors in several supply chain finance funds. The 1,000 fund investors have threatened litigation as they stand to lose billions, despite the Swiss bank marketing the funds as fully insured and low-risk.

Bluestone was the first Greensill client to take legal action. It filed a lawsuit in March in Manhattan federal court against the company and its founder, Lex Greensill. Justice added that his coal mining empire could itself fail owing to the “sudden and unjustified abandonment” by the financing firm.

In the company’s original complaint, Bluestone claimed it was unaware of Credit Suisse’s involvement in the loans until February this year. It had initially refused to repay the bank.

Additional reporting by Stefania Palma

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