Credit Suisse to Front Some Greensill Fund Recovery Costs
(Bloomberg) -- Credit Suisse Group AG said it will front “as much as possible” of the legal and advisory costs to recover cash for investors in supply-chain finance funds it ran with the now-defunct Greensill Capital.
The majority of expenses incurred in recovering the money has not been passed onto investors, Credit Suisse said in a statement published on Wednesday. It estimates it will spend around $145 million for the process in 2021.
Credit Suisse’s asset management arm “is fronting as much of this expense as possible and will seek to recoup the amount which has been incurred when appropriate,” it said. Part of the recovery work is being done by the bank’s own teams and those costs will be absorbed by the bank.
The Swiss bank ran a suite of funds that invested in notes issued by Greensill Capital, a specialty lender that went into administration in March. Expenses incurred include advisory fees, money to continue operating Greensill infrastructure and ongoing fund costs, it said.
Credit Suisse is still trying to recover $2.7 billion in overdue loan payments. The majority - -$2.3 billion -- lies with problem borrowers Katerra Inc., Sanjeev Gupta’s GFG Alliance Ltd., and Bluestone Resources Inc. All three are undergoing restructuring processes and the bank has said it needs more time to assess how much of investors’ money it will get back.
Refinancing and restructuring discussions are ongoing with respect to GFG Alliance’s assets in the US, the U.K., and Australia. Katerra is in a U.S. Chapter 11 process and a liquidator has been appointed. The bank said it began conversations with Bluestone and its shareholders to find an agreement on payments, which is unlikely to happen before the fourth quarter. The company is offering $300 million and half of the value of its business to repay the loans made by Greensill Capital that ended up in the Credit Suisse funds, Bloomberg reported.
The remaining $400 million is due to late payments from debtors who are at risk of insolvency or unable to refinance. The bank said it can expect a recovery of more than 90% but less than 100% of the aggregate value of those loans.
Last week police raided the Swiss lender’s Zurich offices to confiscate documents as part of an investigation into whether investors in the Greensill-funds were misled. The public prosecutor opened proceedings against an “exponent” of Greensill as well as unknown persons.
While neither the bank nor current or former employees are persons of interest in the investigation, the “unknown persons” classification gives prosecutors looking into the matter more leeway to name more people or corporate entities as they progress with their investigation.
The bank marketed its 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 strategy grew, they strayed from that pitch and much of the money was lent through Greensill against expected future invoices, for sales that were merely pitched.
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