Credit Suisse Makes $750 Million Greensill Investor Payment

Credit Suisse Group AG said it’s making a further $750 million payment to investors in its supply-chain finance funds that invested in Greensill products, though warned there’s still uncertainty over how much will ultimately be recovered.

The payments will take the total paid to investors in the funds to $5.6 billion, according to a statement from the bank on Friday. The funds’ total cash position -- including the $4.8 billion already returned -- is now about $6.1 billion, or about 61% of assets under management when they were suspended, it said.

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 $10 billion 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 credit-worthy borrowers.

The collapse of Greensill marked an early reversal in Chief Executive Officer Thomas Gottstein’s one-year 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.

Credit Suisse warned in an accompanying question-and-answer section to investors on Friday that the recovery of $2.3 billion related to exposure in focus areas involving loans made to Sanjeev Gupta’s GFG Alliance, U.S. coal miner Bluestone Resources and failed construction startup Katerra Inc. would be more complex and take time.

“The situation is complex, substantial payments are not yet due and more time is required to assess the situation accurately,” the bank said. “At this stage, it is difficult to specify with reasonable certainty the level of recovery expected.”

Credit Suisse added that outside of the focus areas some of the borrowing companies had asked to reschedule payments due to short-term liquidity constraints. The bank is beginning discussions regarding potential restructuring with a number of more serious cases, which may mean full repayment is no longer possible.

Late payments totaled $2.3 billion as of June 29, of which $1.8 billion are owed by GFG, Katerra and Bluestone notes.

Credit Suisse has notified insurance companies that cover specific notes that are overdue of its claim, but warned that coverage disputes may last several years.

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