Credit Suisse has launched a review of a series of its funds that made big bets on the debt of struggling start-ups backed by SoftBank, after the Financial Times revealed that the Japanese technology conglomerate had also invested its own money in these investment vehicles.
SoftBank has quietly poured more than $500m into the Swiss bank’s $7.5bn range of supply-chain finance funds, the FT reported last week. Credit Suisse touts these funds to professional investors, such as corporate treasurers, as a safe place to park their cash in the short-term debts of seemingly diversified companies.
In the past year, the funds have started providing large amounts of financing to several start-ups in the Japanese group’s $100bn Vision Fund. This includes several companies hit hard during the coronavirus crisis, such as Indian hotel business Oyo and struggling car subscription start-up Fair.
The Swiss bank has now begun a review of the arrangement, in which Greensill Capital, a Vision Fund-backed finance company that employs former UK prime minister David Cameron as an adviser, plays a central role.
‘We are reviewing certain aspects of the matter, as is standard practice in similar circumstances,” Credit Suisse said on Wednesday.
Greensill, which specialises in providing supply-chain finance to businesses, is at the centre of the circular flow of funding, as it selects all of the assets that go into the Credit Suisse funds under an agreement dating back to 2017.
The arrangement has allowed SoftBank effectively to provide financial assistance to other Vision Fund companies by paying their suppliers upfront but through a fund commingled with other investors and financing other companies.
Greensill said: “We have read reports about a procedural matter surrounding certain investment funds at Credit Suisse. Greensill is not involved in this process as it is an internal matter for Credit Suisse.”
“Greensill continues to enjoy a very strong relationship with Credit Suisse as we have done for a number of years,” it added.
SoftBank did not immediately respond to a request for comment.
Credit Suisse’s review of the funds was first reported by Swiss financial blog Inside Paradeplatz.
Clients have withdrawn more than $1.5bn from these supply-chain finance funds this year after a string of Greensill’s clients defaulted on their debts in high-profile corporate collapses and accounting scandals, such as former FTSE 100 company NMC Health. Credit Suisse has told investors that a group of insurers and Greensill itself are covering losses in the funds.
There have been other near misses. The funds also provided financing to Phoenix Commodities, a Dubai-based rice trader that is now on the verge of collapse, but they were repaid before the commodity trading company ran into difficulty.
Greensill-linked debts were at the heart of a previous scandal in the Swiss asset management industry.
In 2018, Zurich-based GAM was forced to liquidate a fund that had invested in illiquid bonds the London-based finance firm had arranged for Sanjeev Gupta’s companies. The Credit Suisse funds also provide financing to the Indian-born entrepreneur’s industrial and commodities trading businesses.