SoftBank leaves Credit Suisse funds after circular funding review

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SoftBank bought back its investment in Credit Suisse funds that have made big bets on the debt of startups backed by Japanese tech conglomerate Vision Fund, after the Swiss bank completed a review of the circular financing deal.

Credit Suisse launched the review after the Financial Times revealed that SoftBank had invested more than $ 500 million of its own money in the more than $ 7.5 billion range of investment vehicles.

The funds in turn provided significant funding to several start-ups in which the $ 100 billion Vision Fund held stakes, including companies hard hit during the coronavirus crisis, such as Indian hotel Oyo.

Credit Suisse touts these funds to professional investors, such as corporate treasurers, as a safe place to park their cash, since the companies whose short-term debt they invest in are apparently diverse.

The funds’ investments so far come only from Greensill Capital, a Vision Fund-backed finance company that employs former UK Prime Minister David Cameron as an advisor, in a 2017 deal.

In a letter to investors on Monday, Credit Suisse reassured them that they had “suffered no loss as a result of these relationships,” but said it had determined that around 15% of fund assets were invested in companies in which SoftBank’s Vision Fund held minority stakes.

The bank wrote that it intended to update the funds’ investment guidelines to reduce their maximum exposure limits to a single company, including “those supported by the Vision Fund”, subject to regulatory approval.

The letter also said that an investor – whom those familiar with the matter said was SoftBank – had “redeemed his entire investment.” Credit Suisse also ended an agreement reached with SoftBank in April, which the letter said “formally prevented” funds from sourcing investments from parties other than Greensill.

“We take note of the information that Credit Suisse has completed its review which concluded that it has full confidence in the supply chain finance funds and the overall control structure of Credit Suisse Asset Management,” said stated Greensill Capital.

“We also welcome the measures taken in the interest of all investors. We have built a very strong partnership with Credit Suisse over the past four years and are proud that supply chain finance funds have consistently delivered strong returns for investors during this time.

SoftBank declined to comment. Credit Suisse referred to the letter to investors.

Australian financier Lex Greensill cemented his status as a paper billionaire last year when SoftBank’s Vision Fund invested $ 1.5 billion in his eponymous company, which he founded in 2011. Greensill Capital specializes in supply chain finance, where companies borrow money to pay their suppliers.

Credit Suisse told investors this year that a group of insurers and Greensill itself were covering a number of defaults in funds that occurred after the collapse of clients of the SoftBank-backed group, including the former company FTSE 100 NMC Health.

Greensill-related debts were at the heart of the 2018 scandal in the Swiss asset management industry, when Zurich-based GAM was forced to liquidate a fund that had invested in illiquid bonds that the based finance company. in London had arranged for the companies of Sanjeev Gupta. Credit Suisse funds also finance the industrial and commodity trading activities of the Indian-born entrepreneur.

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