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Specialty finance firm Greensill Capital is on track for a quick unraveling after Credit Suisse Group AG suspended $ 10 billion in investment funds that began fueling SoftBank Group Corp support.
| Ticker | Safety | Last | Alter | Alter% |
|---|---|---|---|---|
| CS | CREDIT SUISSE GROEP AG | 14.70 | +0.25 | + 1.73% |
| 9984 | after | after | after | after |
| F | FORD MOTOR CO. | 11.98 | +0.28 | + 2.39% |
| APO | APOLLO GLOBAL MGMT | 50.38 | +0.92 | + 1.86% |
| AZN | ASTRAZENECA PLC | 48.09 | -0.29 | -0.60% |
| F | FORD MOTOR CO. | 11.98 | +0.28 | + 2.39% |
With a major source of funding frozen, Greensill hired Grant Thornton to lead him through a possible restructuring. According to people familiar with the company, he could file for insolvency, the UK equivalent of bankruptcy, within days.
According to people familiar with Greensill, he is with private equity giant Apollo Global Management Inc. selling its operating business for about $ 100 million. Although a transaction would not apply to all of Greensill’s assets, the amount represents a bit of the highest valuation of $ 4 billion.
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UK-based Greensill is the brainchild of the former Citigroup Inc. and Morgan Stanley financier Lex Greensill. Founded in 2011, Greensill specializes in an area known as supply chain financing, a form of short-term cash advance that allows companies to extend the time they need to pay their bills.
Greensill packs the cash advances into bonds such as bonds that give investors a higher return than they can get from bank deposits. Credit Suisse’s funds were a major buyer of these bonds, giving Greensill a firepower to expand its business. Investors in the funds include pensions, corporate treasurers and wealthy families.
Greensill’s problems came to a head on Monday after Credit Suisse said it would stop investors from buying or selling four private investment funds that rely solely on securities created by Greensill.
Specialty finance firm Greensill Capital is on track for a quick unraveling after Credit Suisse Group AG suspended $ 10 billion in investment funds that began fueling SoftBank Group Corp support. Photographer: Stephen Kelly / Bloomberg via Getty Ima
Credit Suisse has frozen the funds because some of its assets are currently “subject to major uncertainties and their accurate valuation”, according to a notice the bank sent to investors.
The Wall Street Journal reported on Sunday that the bank was concerned about Greensill’s exposure to a single customer, state magnate Sanjeev Gupta, who is in the UK, according to people familiar with the matter.
Mr. Gupta is a former shareholder of Greensill and Greensill provided financing to Gupta’s GFG Alliance group, which created a metal empire by acquiring failed steel mills and other emergency industry ventures.
Last month, a bid by one of Mr. Gupta’s companies to acquire the steel operations of the German Thyssenkrupp AG failed after the latter company ended the talks on an agreement.
According to the person familiar with the investigation, the German bank regulator BaFin started last year to close the ties between Mr. Investigate Gupta’s businesses and Greensill’s German banking unit. The regulator is concerned that Greensill Bank has too much exposure to Gupta’s businesses.
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A further factor in Credit Suisse’s decision to suspend the funds: Greensill’s insurance policies, which provide protection if assets fail, have lapsed in recent days, according to some people familiar with the matter. Greensill’s business model relied heavily on such credit insurance to give investors the comfort of having their money safe.
A Greensill spokesman acknowledges that the company acknowledges Credit Suisse’s decision and that Greensill remains in advanced talks with potential foreign investors.
Talks are underway with Apollo. If an agreement is reached, the private equity firm will take over the relationship with dozens of Greensill lenders within days, including a collection of blue-chip firms and government agencies such as the UK National Health Service, according to people familiar with the talks. .
According to the people, the insurance clients of Apollo, including Athene Holding Ltd., the insurance company in which Apollo has an interest, would be financed. The insurance clients are not interested in assets that belong to mr. Gupta is not connected, the people added.
Greensill has portrayed itself as a shitty tech company that is more agile than sloppy banks. It counts former British Prime Minister David Cameron as an adviser. It owns a bank in Germany and does transactions that are closer to traditional commercial banking services, such as loans to major investment projects.
In terms of supply chain financing, Greensill competes with traditional banks such as Citigroup and JPMorgan Chase & Co. for investment grade clients. Some of Greensill’s blue-chip customers include AstraZeneca PLC and Ford Motor Co. Greensill has also expanded its financing to lesser-known businesses, including small businesses and businesses that are considered higher-risk lenders.
In a typical supply chain financing agreement, Greensill pays a company’s suppliers faster than they would normally expect, but at a discount. The company then pays Greensill the full amount along the way. The supplier is paid early, the company has more flexibility over its cash and Greensill sits with a small profit.
It attracted capital from SoftBank’s giant Vision Fund, which plowed in $ 1.5 billion, giving it a valuation of $ 4 billion. A person familiar with the Vision Fund said he was expected to write down the entire investment.
Credit Suisse’s quest to cut the Greensill funds is a challenge to start funding. Greensill’s total financing business was $ 143 billion last year, well below target. Several Greensill customers have experienced financial difficulties, while companies that have teamed up with loose ties.
Greensill recently tried to raise up to $ 1 billion in capital that the company would value at $ 7 billion. According to the people familiar with the fundraiser, the business wants to stop the issues related to the exposure to Gupta’s businesses.
This is not Greensill’s first run-up with a fund suspension. In July 2018, Swiss asset manager GAM Holding AG froze a $ 12 billion fund after an internal whistleblower expressed concern about how the fund values Greensill assets. It has hundreds of millions of dollars in illiquid assets owed to Mr. Gupta’s businesses were linked, included.
The suspension did not prevent Greensill from expanding. After the GAM funds expired, Credit Suisse’s funds grew rapidly, giving the company a new pool of investors who used its ability to conduct financing transactions in the supply chain.
Greensill’s problems could be painful for SoftBank. The firm has turbocharged other Vision Fund holdings by expanding their short-term financing.
Not all of these transactions worked out. In December, Greensill forgave $ 435 million in financing to start-up Katerra, about the same time the Vision Fund put another $ 200 million into it. In return, Greensill acquired a stake of about 5% in Katerra. Last month, a Greensill spokesman said investors had not suffered losses with Katerra.
Vision Fund is investing in Fair Financial Corp., a car finance company, and View Inc., a glassmaker, has also received funding from Greensill.
SoftBank’s multilayer roles in Greensill have drawn controversy. In addition to investing in Greensill itself and receiving Greensill funds through its portfolio companies, SoftBank has invested $ 700 million in the Credit Suisse-managed Greensill funds.
Last year, executives at Credit Suisse became concerned about possible conflicts of interest related to SoftBank’s roles. SoftBank has finally redeemed its stake in the Credit Suisse funds, and Credit Suisse has told investors that it is “committed to taking steps to further protect them”.
For Credit Suisse, the fund suspensions are the latest setback for its asset management division. The unit, which manages approximately $ 480 billion, took on a $ 450 million impairment charge on a stake in investment manager York Capital Management after York reduced its operations, pushing Credit Suisse to a loss in the fourth quarter .
Finma, financial financial regulator, said on Monday that he was in contact with Credit Suisse about the fund suspension, but did not want to comment further.