SoftBank sets $ 400 million monthly before collapse

Greensill, which specializes in making short-term cash advance loans to companies, applied for insolvency this week after regulators took over its banking unit and Credit Suisse Group. AG

freezes investment funds that are critical to the startup industry.

Greensill packaged loans to companies in bonds, known as notes, which were bought by the Credit Suisse funds and sold to investors as low-risk money market-style investors.

SoftBank, founded by billionaire Masayoshi Son, is a giant in the field of investments, with interests spanning microchips, self-driving cars, satellites, e-commerce and mobile networks. The Japanese conglomerate’s $ 100 billion Vision Fund, and a smaller successor fund, has invested in more than 80 companies. In addition to Greensill, it includes Uber Technologies Inc.

and TikTok owner ByteDance Ltd.

The $ 400 million was the latest in a long series of complex financial arrangements between the Vision Fund and Greensill. SoftBank is writing down its Greensill investment, The Wall Street Journal reported last week, citing a person familiar with the matter.

In March 2020, when Covid-19 reached markets, investors withdrew their money from the Credit Suisse funds, which Greensill sees as a major source of off-balance sheet financing. SoftBank has plowed $ 1.5 billion into the Credit Suisse-Greensill funds to help operate them, the Journal reported last week.

The money was separate from the $ 1.5 billion investment SoftBank’s Vision Fund made directly in Greensill in 2019.

Greensill used the Credit Suisse funds to lend to other SoftBank Vision Fund companies. The Credit Suisse funds had approximately $ 750 million in supply channel financing loans to Vision Fund companies at the end of March 2020, according to fund documents sent to investors.

These include the car finance company Fair Financial Corp; Indian hotel chain Oyo Hotels & Homes; glassmaker View Inc.

; and the Chinese online trading platform Chehaoduo Group.

In essence, SoftBank was the largest subsidiary of Greensill, a lender through the Credit Suisse funds and a lender through its Vision Fund companies.

The Journal reported last year that the multiple roles within Credit Suisse have led to changes in the operation of the fund. SoftBank redeemed its position in the funds by July last year, although lending to the Vision Fund companies continued.

Another Greensill lender from the Vision Fund was American Katerra, a construction contractor in the factory. In December, SoftBank invested $ 200 million in construction to help avoid bankruptcy. Katerra’s chief executive told the Journal at the time that Greensill had also forgiven $ 435 million in financing in exchange for a 5% stake in the company.

It was not clear how Greensill would absorb the loss by forgiving the loan.

One of the people said that SoftBank had invested $ 400 million in Greensill in the form of convertible debt. The money was earmarked to compensate Katerra’s inability to repay Greensill and would protect Credit Suisse investors from losing any notes linked to Katerra, some of the people familiar with the matter said.

Managers of Vision Fund have talked for a long time about the potential benefits that can be gained by collaborating with its investment firms. The fallout from Greensill shows that reality was more complicated.

The collapse of Greensill also highlights the risks of the Vision Fund’s excessive betting on unproven companies. This had to challenge the value of other investments, including office landlord WeWork and Oyo Hotels.

Despite its setbacks, the giant technology investor has made several notable gains. In the last quarter of 2020, the Vision Fund made a profit of $ 13 billion on its investments. It is likely to earn a multiple of its investment in South Korean e-commerce company Coupang Inc., which is expected to be announced soon at a valuation of more than $ 50 billion. Meal Delivery Service DoorDash Inc.,

which became known earlier this year was also a hit.