Greensill used Credit Suisse investment funds to lend to its own backers
Greensill Capital used
supply chain funds now slashed to grant a $ 350 million loan to one of the startup’s largest outside backers, private equity firm General Atlantic, according to loan documents reviewed by the Wall Street Journal and people familiar with the matter.
The previously unreported loan would be Greensill’s second example of a loan of money to one of its co-owners. Last year, Credit Suisse executives launched a review of the funds it manages with Greensill after worrying about the biggest investor in the financial startup,
SoftBank Group Corp.
, which also benefited from loans from Greensill, the Journal previously reported.
Greensill was founded in 2011 by former Morgan Stanley and
banker Lex Greensill. He plunged into crisis on Monday when Credit Suisse has frozen $ 10 billion in investment funds that Greensill relies on to enter into supply chain finance agreements, a form of short-term cash advance for businesses. The Swiss bank announced on Friday that it would liquidate the funds.
Greensill considering filing for bankruptcy in the coming days in the UK and is in talks to sell its operating business to
according to people familiar with the matter. The sale would be for a fraction of its peak valuation, which was $ 4 billion in 2019.
The financial startup granted the euro-denominated loan in 2019 to General Atlantic, which is the second-largest outside investor after SoftBank’s Vision Fund. General Atlantic used the loan to finance the acquisition of shares in a joint venture with the German stock operator
, according to loan documents and people familiar with the matter.
Recent disclosures Credit Suisse made to its fund investors and reviewed by the Journal did not mention transactions with General Atlantic. A January 2021 fund document lists an estimated $ 95 million supply chain finance deal with Deutsche Börse, General Atlantic’s joint venture partner.
Banking regulators set limits on loans to major owners of a bank to avoid conflicts of interest. In Greensill’s case, part of the loan was made by its German banking unit, according to the loan documents. Regulators said this week that they froze the operations of the bank.
Other parts of the loan were repackaged into securities and sold to one of Credit Suisse’s supply chain funds.
The General Atlantic loan “offers Greensill the opportunity to strengthen its relationship with a major sponsor while achieving a strong return,” say Greensill’s internal loan documents. A sponsor is financial jargon for an investor.
General Atlantic invested $ 250 million in Greensill in 2018. She held a stake of around 15% at the time of the loan, according to one of the people familiar with the matter. He currently owns around 7%, the person said.
Founded in 1980, General Atlantic has $ 53 billion in assets and offices around the world. The company is known for taking stakes in fast growing technology companies, such as
, before they are made public.
In SoftBank’s case, its role in Credit Suisse funds was more important than previously thought. In March of last year, as fears over Covid-19 hit the markets, investors withdrew their money from Credit Suisse funds, depriving Greensill of a key source of off-balance sheet funding.
Mr. Greensill, the founder of the company, called SoftBank chief executive Masayoshi Son for help, according to people familiar with Greensill’s relationship with SoftBank. The Japanese billionaire has agreed that SoftBank inject $ 1.5 billion into the fund, according to the population. This figure is higher than the $ 700 million reported by the Journal last year.
This money was separate from the $ 1.5 billion investment SoftBank’s Vision Fund made directly to Greensill in 2019.
At the end of March, four Vision Fund companies were among the top 10 recipients of funding from Credit Suisse funds, receiving around $ 750 million in total, according to a fund document sent to investors.
The Vision Fund companies were self-financing company Fair Financial Corp .; the Indian hotel chain Oyo Hotels & Homes; glass maker View Inc .; and the Chinese online car trading platform Chehaoduo Group.
In essence, SoftBank was a co-owner of Greensill, a lender through Credit Suisse funds, and a borrower through its Vision Fund companies. The multiple roles sparked the review within Credit Suisse, the Journal reported last year.
SoftBank bought out its position in funds by July of last year, and Credit Suisse pledged to make changes to funds that would protect investors. The bank wrote to investors to reveal that about 15% of the notes in the funds were tied to companies in the SoftBank Vision Fund, according to a letter viewed by the Journal.
In December, the Journal reported that Greensill had canceled a $ 435 million loan he made to another Vision Fund company, construction startup Katerra. At the time, Katerra received $ 200 million bailout from SoftBank which helped him avoid bankruptcy.
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