Greensill Says He Warned Credit Suisse Weeks Before Collapse
(Bloomberg) -- Lex Greensill said he told top Credit Suisse Group AG officials of his difficulties in securing fresh insurance to cover corporate loans underpinning his business for weeks before his supply-chain finance empire’s abrupt collapse.
The ex-billionaire “regularly updated” executives including Chief Risk Officer Lara Warner on his problems in finding new cover after Australian insurer Bond and Credit Company had decided against renewing policies on $4.6 billion of corporate loans. The Swiss bank “was aware of the difficulties that Greensill Capital was having in renewing the TBCC policies and the likely consequences of a failure to renew,” the financier said in newly disclosed court documents.
The documents add a new twist to a saga that rocked markets when Credit Suisse froze $10 billion of funds March 1 over valuation uncertainties. The decision came on the same day as a court in Australia shot down a last-ditch effort by Greensill to force the insurer to provide more coverage. Credit Suisse is now returning about $3.7 billion in cash that the funds were holding, but hasn’t said how much of investors money is ultimately likely to be returned or when they’ll get it.
Credit Suisse declined to comment. In a statement on its website, the bank said it was only informed “very recently” about the insurance lapse at the heart of Greensill’s downfall.
The scandal continues to ripple through the bank and has claimed some early casualties. Credit Suisse temporarily replaced three employees in its asset management unit tied to the funds. Michel Degen, head of asset management in Switzerland and EMEA, is being replaced on an interim basis by Filippo Rima, according to a person with knowledge of the matter. Luc Mathys, head of fixed income in the unit, was also suspended from his role, the person said. It’s started an internal probe into the collapse of the supply chain finance strategy.
The scandal is also raising fresh questions about the firm’s risk management after a series of missteps and Warner’s role after she signed off on a $140 million loan to Greensill in late October, overruling some risk managers, people familiar with the matter said recently. As one of the highest-profile executives of the Tidjane Thiam era to stay on after the Ivorian’s departure, she was recently promoted under new Chief Executive Officer Thomas Gottstein to group chief risk and compliance officer -- two functions that were previously separate.
Warner has challenged risk managers to stop thinking only about defending the bank’s capital and also look at strategic business priorities, according to people familiar with the matter. But recent hits -- including the collapse of client Luckin Coffee -- have raised questions about whether Credit Suisse prioritized revenue growth at the expense of risk and compliance.
The documents were disclosed following a Bloomberg News application for the witness statement of Greensill at proceedings to appoint administrators. He described the events that led to the unraveling of his eponymous firm as “something of a perfect storm.”
In the statement, Greensill also revealed a 110 million-euro ($131 million) loan taken out last July by Greensill Capital from Greensill Bank AG, the company’s German lender. As of the end of February, $108.6 million of what it described as a “revolving factoring loan agreement” was outstanding. The loan is due to mature at the end of the year.
Executives at Credit Suisse also knew early on that a large portion of the assets in the funds were tied to Sanjeev Gupta, a Greensill client whose borrowings were at the center of a 2018 scandal at rival asset manager GAM Holding AG, Bloomberg has reported. About a third of the assets in the strategy’s flagship were linked to Gupta’s GFG Alliance companies or his customers as of April 2018, according to a filing.
On Nov. 5, Greensill agreed with Credit Suisse to pay as much as $390 million in any shortfall from the failure of its assets. The document shows the financier would pay the shortfall “to the extent” that Bond and Credit Company declines any claim. The indemnity was provided in a letter to Credit Suisse’s Nova Lux fund.
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