Bloomberg
Credit Suisse freezes $ 1 billion in funds as scandal escalates
(Bloomberg) – Credit Suisse Group AG freezes four more funds that have invested in the bank’s $ 10 billion supply chain financing strategy, contributing to the growing scandal surrounding the bank’s exposure to Lex Greensill’s failed empire. The additional funds have about $ 1.2 billion in assets, some of which have poured into the four Greensill-linked funds that Credit Suisse is now liquidating. The bank suspended them on March 1, the same day it froze the supply chain financing strategy. That put the decision in an investor update on March 9th. The largest additional funds are the $ 701 million Credit Suisse (Lux) Multi Strategy Bond Fund and the $ 303 million Credit Suisse (Lux) Multi Strategy Alternative Fund. it causes a crisis that has forced Credit Suisse to seek outside help to deal with regulators’ inquiries and threatens to set the bank up with losses on a loan it made months before the collapse of Greensill’s empire. For CEO Thomas Gottstein, this is probably the worst reputation hit since he took over about a year ago in the wake of a damaging espionage scandal. Credit Suisse is freezing its supply chain financing strategy – which invested in short-term financing arranged by Greensill – – after doubts arose over the valuations of some assets, which sparked a series of events that culminated in the collapse of Greensill Capital. The bank had already kept them as a success story in December. Although the money pools returned most of their cash, about two-thirds of the investors’ money remained tied up. The bank said it was exploring various options to reopen the four additional funds it had frozen, along with the Greensill-linked strategy. The other two funds in the group are the Credit Suisse (Lux) Qatar Enhanced Short Duration Fund and the Credit Suisse (Lux) Institutional Target Volatility Fund. Credit Suisse has launched an internal investigation into the collapse of the supply chain financing strategy. It temporarily replaced three employees in its asset management unit linked 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, and another manager who manages the funds were also suspended from their roles, the person said. The Swiss moneylender also reaches out to external companies to deal with questions about regulators surrounding the collapse, people are familiar with the matter and have asked for anonymity in discussing internal information. Credit Suisse has started repaying money from the funds for the supply chain to investors. The first payments of just over $ 3 billion were made to investors earlier this week, according to an investor’s V&A on the bank’s website. Further proceeds will be distributed in different installments. Many of the assets in the funds have insurance protection to make them more attractive to investors looking for alternatives to money markets, but a major insurer – the Japanese Tokyo Marine Holdings Inc. – has since questioned the validity of the contracts with Greensill Capital. The incredible drop in Greensill within days was set in motion last year when Tokyo Marine’s Bond & Credit Co. unit decided not to renew policies covering billions of dollars in loans that the supply chain’s financial venture has incurred. In the court documents, the default protection of about $ 4.6 billion in credit lapsed after a futile attempt by Greensill to obtain an order to keep it going. Apart from the loss of insurance, Credit Suisse also pointed out separate valuation uncertainties for some of the funds’ holdings. A large portion of the assets were linked to industrialist Sanjeev Gupta early on, Bloomberg reported. Gupta’s GFG alliance is now struggling to negotiate a postponement of its debt obligations to Greensill Capital. (Updates with the value of funds, date of investor update in the second paragraph and information from investors’ V&A throughout) Visit us at bloomberg.com for more articles like this. Sign up now to stay ahead of the most trusted business news source. © 2021 Bloomberg LP