Credit Suisse and Taulia move to deal with fallout from Greensill insolvency

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By Brenna Hughes Neghaiwi, Makiko Yamazaki and Pamela Barbaglia

ZURICH/TOKYO (Reuters) – Credit Suisse is facing questions from regulators and insurers as it grapples with the fallout from the collapse of $10 billion in funds linked to British financial services firm Greensill Capital .

The Swiss bank has hired outside firms to help them with their investigations following the insolvency of Greensill Capital, a source familiar with the matter said on Wednesday.

Greensill’s insolvency had ramifications in the world of trade finance, threatening companies that relied on its platform to receive faster payment for goods they had supplied to larger entities.

Taulia, a San Francisco-based fintech company that had worked closely with Greensill, said on Wednesday it had secured more than $6 billion in funding from a JPMorgan-led consortium to guarantee its customers the access to cash.

The Wall Street bank provided $3.8 billion of a $6 billion overall funding package, also backed by UniCredit, UBS and BBVA.

Meanwhile, the head of Credit Suisse’s European asset management arm, which sold Greensill-linked supply chain finance funds to investors, has temporarily stepped aside along with two colleagues, the company said. bank in a note.

Credit Suisse, which was a key funding source for the specialist finance firm, selling Greensill-created securities to investors through its asset management arm, is also taking steps to recover a $140 million loan in Australia. .

Supply chain financier Greensill began to collapse last week after it lost insurance cover for its debt rollover business, prompting Credit Suisse to freeze funds linked to it .

Switzerland’s second-largest bank has engaged the external firms to speed up the process of returning proceeds from the liquidation of funds to investors, the source told Reuters.

Credit Suisse has so far made $3.05 billion in payments to investors. He said additional liquidation proceeds would be paid “as soon as possible”.

There are questions about the insurance contracts underlying the Greensill securities, which were intended to protect investors in the event of default.

Japanese insurer Tokio Marine, which provided $4.6 billion of cover for Greensill’s credit ratings, said it was investigating the validity of those policies, which it inherited when buying Insurance. Australia Group in 2019.

A source close to the situation said the policies were directly linked to Credit Suisse’s $10 billion fund.

Credit Suisse said in a note to investors on Tuesday that it had not been made aware of any insurance cancellations “until very recently” and that existing Insurance Australia policies remained unchanged.

The bank declined to comment on Tokio Marine’s investigation.

If Greensill’s lending practices did not meet the standards set out in the insurance contract or were inconsistent with normal accounting rules, then an insurer would have grounds to challenge whether cover applied, chain experts said. supply.

Greensill declined to comment.

“We have concerns about the validity of all Greensill policies and are investigating,” Tokio Marine spokesman Tetsuya Hirano said.

Hirano said the $4.6 billion coverage awarded to Tokio Marine Holdings in court filings did not reflect the likely loss. He declined to comment further.

In Germany, where Greensill runs a bank, financial regulator BaFin has filed a criminal complaint with prosecutors in Bremen, where it is based. Precise details are not known.

BLOW FOR THE CEO OF CREDIT SUISSE

The funds’ troubles are a blow to Credit Suisse boss Thomas Gottstein, who became chief executive following a spy scandal and just as the coronavirus crisis hit.

The asset management unit behind the Greensill strategy was hit by a large impairment charge on a hedge fund investment in the fourth quarter.

Credit Suisse said in a note sent to employees on Wednesday that Michel Degen, head of asset management in Switzerland and the EMEA region, was temporarily stepping down alongside managers Luc Mathys and Lukas Haas.

Reuters could not immediately reach Degen, Mathys or Haas for comment. According to their LinkedIn profiles, Mathys led fixed income within the division and Haas worked in credit risk management. Haas has been listed as a fund manager for some of the Greensill funds according to various fund websites.

Meanwhile in Australia, two people familiar with the matter said Credit Suisse had appointed receivers to recover a bridging loan to a Greensill company.

Credit Suisse was advising Greensill on a possible IPO last year and had been paying attention to the $140 million that would be repaid when it listed, one of the people said.

Credit Suisse declined to comment and Greensill did not respond to requests for comment.

The impact of Greensill’s insolvency is also being felt at its biggest client, GFG Alliance, an umbrella company in metals tycoon Sanjeev Gupta’s network of steel, aluminum and energy companies.

A spokesperson said Wednesday that GFG had appointed an advisory team including boutique advisory firm PJT Partners, turnaround advisor Alvarez and Marsal and law firm Norton Rose Fulbright to “support refinancing efforts and negotiate a standstill agreement with the administrator of Greensill”.

APOLLO TALKS DERAILS

Greensill was initially in talks to sell part of its operating business to Athene Holding – an annuity seller that recently merged with Apollo Global Management.

Still, talks for a potential M&A deal fell apart after its technology partner Taulia secured funding from JPMorgan – also one of Taulia’s investors and a key strategic partner – as well as other European lenders. sources told Reuters.

Founded in 2009, Taulia works with financial institutions to enable suppliers who use its platform to receive advance payments on their delivered goods and services.

The company, led by boss Cedric Bru, said the credit facility would help customers who previously relied on Greensill financing to continue to receive their payments.

“Following the well-documented challenges faced by Greensill in recent weeks, Taulia has worked closely with its funding partners to ensure its formerly Greensill-funded programs have continued access to liquidity,” the company said in a statement.

Taulia had previously expressed concern that any deal between Apollo and Greensill would affect its own business model, sources say, which relies on using multiple banks for funding to reduce risk to customers and make them less dependent on a single financial institution.

“Taulia’s priority, above all else, has been to enable companies large and small to unlock the cash trapped in their supply chain to invest, operate and thrive,” said Chief Executive Bru. .

“In today’s environment, with the potential loss of a funder, our commitment to providing choice has become even more paramount.”

(Reporting by Brenna Hughes Neghaiwi in Zurich and Iain Withers in London; Additional reporting by Paulina Duran in Sydney, Makiko Yamazaki in Tokyo and Pamela Barbaglia in London; Writing by Alexander Smith; Editing by Carmel Crimmins and Nick Zieminski)

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