Credit Suisse is liquidating $ 10bn (£ 7.2bn) worth of specialized funds that were invested primarily in loans tied to Greensill, the crisis-hit supply chain bank.
Greensill, which employs 1,000 people in London and has former Prime Minister David Cameron as an advisor, is preparing to file for bankruptcy and is in talks to sell part of its business to the US private equity firm Apollo Global Management, after it lost the backing of Credit Suisse and her Swiss investment partner GAM.
Both Greensill and Apollo declined to comment.
“The fund boards have now decided to rescind the funds. Credit Suisse Asset Management’s priority is to ensure a balance between a timely settlement of funds and maximizing value for investors, ”the Swiss bank said on Friday.
ICredit Suisse said it was closing the funds due to valuation uncertainties, reduced availability of insurance coverage for new investments and challenges in obtaining suitable investments.
Greensill provides supply chain financing, lending companies money to pay their suppliers in exchange for a fee. He secured the financing by transferring the burden to investors, through funds like the ones Credit Suisse is closing. The Swiss bank is believed to have around 1,000 clients with cash invested in funds linked to Greensill.
Greensill’s problems came to a head on Monday during a court battle in New South Wales, Australia, where his headquarters are located. The bank, founded by Australian financier Lex Greensill, hoped to prevent an insurance company from withdrawing protection. The loss of the case triggered a series of moves by Credit Suisse to reduce its clients’ exposure.
Credit Suisse on Monday suspended repayments of the funds due to concerns about being able to value them accurately, and on Wednesday said it hoped to return excess cash to shareholders.
Credit Suisse said the funds had experienced “reduced availability of insurance coverage for new investments” but declined to say whether existing investments were protected.
The amount of money investors can recover in the funds that are closed may depend on the insurance coverage of the investments.
The funds provide credit backed by blue-chip companies, but also highly-leveraged companies not rated by the big credit bureaus, including GFG Alliance, owned by Sanjeev Gupta. The British businessman owns much of the UK’s steelmaking industry, where he employs some 5,000 people, and unions express concern that jobs will be at risk if Greensill’s problems affect the financing of GFG.
GFG said the company had “adequate funding” and that plans to bring in fresh capital through refinancing were “progressing well.” It said: “We are benefiting from a recovery in the steel and aluminum markets, which means that most of our businesses are operating near full capacity to meet high demand and generating positive cash flows.”
George is Digismak’s reported cum editor with 13 years of experience in Journalism