Credit Suisse said it would wind down $10bn of supply-chain finance funds linked to troubled financier Lex Greensill and start returning cash to about 1,000 affected investors.
The Swiss lender will make initial repayments equivalent to 80 per cent of the roughly $3.7bn in available cash and easily sellable assets from next week, according to a statement on Friday. It is not yet clear what ultimate losses Credit Suisse and its outside investors may take across the four funds.
“The valuation uncertainty with respect to certain investments, the reduced availability of insurance coverage for new investments and the substantial challenges to source suitable investments” are behind the decision to terminate, the bank said. “Credit Suisse Asset Management’s priority is to ensure a balance between a timely liquidation of the funds and maximising value for the investors.”
Greensill Capital was plunged into crisis on Monday after Credit Suisse suspended the funds after learning that $4.6bn of insurance underpinning many of the supply-chain finance contracts had expired. The main insurer refused to renew the policy six months ago.
Greensill has since been rushing to look for alternative funding to avert collapse. Options include a possible rescue deal with private equity firm Apollo Global Management and seeking protection from insolvency laws in the UK. German regulators have filed a criminal complaint against Greensill Bank for suspected balance sheet manipulation and have taken direct oversight of operations.
Another Swiss fund manager, GAM, on Tuesday also ended its relationship with Greensill and is closing its own $842m supply-chain finance fund.
Of the four Credit Suisse funds, the amount held in “cash or cash equivalents” ranges from 69.5 per cent in the safest investment grade fund to 17.9 per cent in the riskiest “high income fund”, according to Friday’s statement. The high-income fund is also the only one of the four without insurance cover.
Most of the supply-chain assets are short-term and payments are still being made into the funds, according to a person familiar with the matter. Of the main $7bn fund — called “Credit Suisse (Lux) Supply Chain Finance Fund”, which has a double A minus credit rating and 38.6 per cent in liquid assets — half matures in the next two months and three-quarters in four months.
Assuming no defaults or fraud, the bank should be able to continue making regular payments to clients, the person added, with insurance still in place and valid on existing assets.
Credit Suisse did not comment on how many of the funds’ assets are linked to Sanjeev Gupta’s GFG Alliance, which the Financial Times reported on Thursday had halted payments to Greensill. German regulators have expressed concerns over the level of Greensill bank’s exposure to companies linked to the metals magnate.