Credit Suisse winds down $10 billion Greensill-linked funds

By Brenna Hughes Neghaiwi and Abhinav Ramnarayan

ZURICH (Reuters) – Credit Suisse said on Friday it is winding down its $10 billion supply chain finance funds, which were mostly invested in notes backed by speciality finance firm Greensill.

London-based Greensill group is preparing to file for insolvency and is in talks to sell parts of its business to U.S. private equity firm Apollo Global Management Inc, sources close to the matter said, after the loss of backing from asset managers Credit Suisse and GAM.

Greensill declined to comment on the insolvency preparations or the Credit Suisse move. Apollo also declined to comment.

“The fund boards have now decided to terminate the funds. Credit Suisse Asset Management’s priority is to ensure a balance between a timely liquidation of the funds and maximizing value for the investors,” the Swiss bank’s fund arm said.

Credit Suisse’s asset management arm added in a statement on Friday that it was closing the funds as a result of valuation uncertainties, reduced availability of insurance coverage for new investments and challenges in sourcing suitable investments.

Switzerland’s second-largest bank had on Monday suspended redemptions from the funds backing Greensill’s lending operations over concerns about being able to accurately value them, and on Wednesday said it was looking to return excess cash to shareholders.

INSURANCE COVERAGE

Credit Suisse said the funds had experienced “reduced availability of insurance coverage for new investments”, but declined to say if existing investments were protected.

How much money investors in the funds being closed recoup may depend on the insurance coverage for the investments.

The funds provide credit backed by blue chip companies but also highly leveraged companies which are not rated by major credit agencies, including Sanjeev Gupta’s GFG Alliance.

GFG declined to comment on the problems facing Greensill, but said it had alternative financing options for its business.

Bond and Credit Company (BCC), a unit of Japan’s Tokio Marine, had provided $4.6 billion of coverage to Greensill credit notes, according to an Australian court ruling which denied Greensill’s request that BCC’s former part-owner, Insurance Australia Group (IAG), be forced to extend coverage.

Tokio told Greensill last year that it had launched an investigation into whether the insurance provided was approved in line with company procedures, court documents showed.

Tokio Marine declined to comment. Insurance Australia said the sale of its BCC stake in 2019 meant that IAG had no further economic interest or exposure to trade credit insurance. Greensill declined to answer questions on insurance matters.

APOLLO PLANS

Apollo has already begun the process of funding Greensill’s clients that they intend to continue to work with if it completes the purchase of Greensill’s operating business, a source familiar with the acquisition talks said.

The private equity group, which is known for buying troubled assets, particularly after the 2008 financial crisis, plans to manage the Greensill process through its partner insurance company Athene, the source added.

Apollo manages the invested assets of Athene, a New York-listed insurer. It will pick out some of the more attractive assets in Greensill’s loan portfolio, the source said.

Another source said that Apollo, through Athene, will prioritise Greensill clients with an investment grade credit rating, and anything below that is unlikely to be included.

A spokesperson for Apollo declined to comment.

Credit Suisse said more than 1,000 investors were invested across the four liquidated funds, all of them institutional or professional investors, and it would begin paying out cash from them in installments beginning Mar. 8.

Cash or cash equivalents accounted for some $3.7 billion of the four Credit Suisse funds’ $10.1 billion value as of last week, a note to investors showed.

(Reporting by Brenna Hughes Neghaiwi, Abhinav Ramnarayan and Tom Bergin; Editing by Riham Alkousaa, John Revill and Alexander Smith)