Credit Suisse boosts payment to investors in Greensill flop

Credit Suisse said it made a $400m payment to investors in its supply-chain finance funds that invested in Greensill products, its fourth such disbursement to clients hit by the liquidation. 

The August 6 payment takes the total paid to investors in the funds to about $5.9bn, according to an updated question-and-answer (Q&A) entry on the bank’s website on Tuesday. The funds’ total cash position is about $7bn, or about 70% of assets under management when they were suspended, it said.

The collapse of Greensill marked an early reversal in CEO Thomas Gottstein’s tenure, before the bank was hit by the even bigger meltdown at hedge fund client Archegos Capital. After Greensill, Gottstein replaced asset management head Eric Varvel and removed the business from direct oversight of wealth management.

The bank had indicated that it expected to make a fourth payment to Greensill investors at the time of second quarter earnings on July 29.

The bank marketed its popular supply-chain finance funds as among the safest investments it offered, because the loans they held were backed by invoices usually paid in a matter of weeks. But as the funds grew into a $10bn strategy, they strayed from that pitch and much of the money was lent through Greensill against expected future invoices, for sales that were merely predicted. The business quickly collapsed after Greensill’s loss of trade credit insurance on many of its notes to less creditworthy borrowers.

Credit Suisse is seeking to recover $2.5bn of overdue loan payments. The lender started talks with Sanjeev Gupta’s GFG Alliance for the restructuring and refinancing of assets in the US and UK, and there are advanced negotiations for GFG’s Australian businesses, according to the Q&A. 

It also filed claims in the US bankruptcy process of construction start-up Katerra, previously backed by Softbank and started talks to restructure the exposure of US coal miner Bluestone Resources.

The bank also made a first claim on overdue notes which were covered by insurance, and is preparing to make more through Greensill’s banking arm. It estimates $145m of advisory fees and other recovery costs for 2021.

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