SoftBank’s infusion to repay Credit Suisse investors went to Greensill Bank
But the money never got to the Swiss bank. Greensill instead placed the money in its own German banking unit, according to a report released Thursday by the bankruptcy administrators of Greensill’s Australian parent company and some of those familiar with the deal.
The detour complicates Credit Suisse’s efforts to recover money owed to investors after Greensill’s bankruptcy last month, people familiar with the matter said.
Credit Suisse this week identified $ 2.3 billion in problematic loans in funds it managed with Greensill, including the $ 440 million loan.
The incident shows the challenge of disentangling Greensill’s complex web of transactions and how Greensill moved funds to plug holes in its operations, according to people familiar with the matter.
Greensill was founded in 2011 by former banker Morgan Stanley and Citigroup Lex Greensill. The company has provided its customers with supply chain financing, a kind of short-term loan that allows businesses to extend the time they have to pay their bills.
Greensill packaged these loans into securities called notes and sold them to third parties, including a $ 10 billion series of funds managed by Credit Suisse. Indeed, Credit Suisse funds have functioned as off-balance sheet financing arms for Greensill.
SoftBank’s $ 440 million was tied to a loan that Greensill granted to Katerra, an American startup that aims to make building construction more efficient, the Wall Street Journal previously reported. Like Greensill, Katerra was backed by SoftBank’s Vision Fund, which encouraged collaboration between the companies in its portfolio. Greensill acted as a lender who could facilitate growth elsewhere in the SoftBank stable.
The loan to Katerra was packaged in the form of notes and sold to investors in a Credit Suisse fund that purchased exclusively assets from Greensill. When Katerra ran into financial difficulties last year, Greensill canceled the loan.
To offset the Katerra loan, SoftBank invested $ 440 million in Greensill, according to people familiar with the transaction. SoftBank executives expected Greensill to send the money directly to Credit Suisse, the sources said.
The amount owed to Credit Suisse funds linked to the Katerra loan was due to be repaid in mid-March, according to people familiar with the matter.
Greensill put the proceeds of SoftBank’s investment into a bank it owned in Bremen, Germany, according to the administrator’s report. The report says Greensill used the money he received from SoftBank, including the $ 440 million, to strengthen his bank’s capital position and fund Greensill’s overall operations.
BaFin, the German banking regulator, had for months pressured Greensill over fears that he had too many loans tied to British steel magnate Sanjeev Gupta, the Journal previously reported. By adding capital to the bank, Greensill was effectively reducing his relative exposure to Mr. Gupta’s businesses, according to one of the people.
In January, some senior Greensill executives feared that the $ 440 million had not reached Credit Suisse, according to people familiar with Greensill’s operations.
Credit Suisse froze its Greensill funds on March 1 and Greensill plunged into insolvency days later.
Credit Suisse is trying to recover the lost money on behalf of the investors in the funds. Katerra doesn’t think there’s a need to repay Credit Suisse because Greensill canceled the loan, according to people familiar with the loan.
BaFin bought out Greensill Bank in March after an audit could not find evidence of collateral backing Mr Gupta’s business loans. The bank was subsequently declared insolvent.
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