Credit Suisse and Taulia take action to address fallout from Greensill’s insolvency

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(This story from March 10 corrects paragraph 12 to say that Tokio Marine bought a unit from Insurance Australia Group, not Insurance Australia Group)

The Greensill Bank logo is pictured in downtown Bremen, Germany on March 10, 2021. REUTERS / Fabian Bimmer

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

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

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

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

The Bank of Wall Street provided $ 3.8 billion on a global $ 6 billion funding program, also backed by UniCredit, UBS and BBVA.

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

Credit Suisse, which was a key source of funding for the specialist finance firm, selling securities created by Greensill 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 losing insurance coverage for its debt repackaging business, prompting Credit Suisse to freeze funds linked to it .

Switzerland’s second-largest bank has engaged outside companies to speed up the process of returning the 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 the liquidation proceeds would be paid “as soon as possible”.

There are questions about the insurance contracts behind Greensill’s securities, which were supposed to protect investors in the event of default.

Japanese insurer Tokio Marine, which provided $ 4.6 billion in coverage to Greensill’s credit scores through an Australian unit, said it was investigating the validity of those policies, which it inherited when it purchased the unit from Insurance Australia Group in 2019.

A source familiar with the situation said the policies were directly linked to Credit Suisse’s $ 10 billion funds.

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 Insurance Australia’s existing policies remained unchanged.

The bank declined to comment on the Tokio Marine probe.

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 the coverage applied, channel experts said. supply.

Greensill declined to comment.

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

Hirano said the $ 4.6 billion hedge attributed to Tokio Marine Holdings in court records 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 he is based. The precise details are not known.

BLOW FOR CREDIT SUISSE CEO

The fund issues 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 significant impairment charge on an investment in a hedge fund 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 managed fixed income securities in 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 collect a bridging loan from a Greensill company.

Credit Suisse was advising Greensill on a potential IPO last year and had lent on expectations that $ 140 million would be repaid upon listing, 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 largest customer, GFG Alliance, an umbrella company of metal tycoon Sanjeev Gupta’s network of steel, aluminum and energy companies.

A spokesperson said on Wednesday that GFG had appointed an advisory team comprising consultancy firm PJT Partners, turnaround adviser Alvarez and Marsal and law firm Norton Rose Fulbright to “support the refinancing efforts and negotiate a settlement agreement. status quo with the administrator of Greensill “.

APOLLO’S TALKS DRAFT

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 over a possible M&A deal collapsed 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, have sources told Reuters.

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

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

“Following the well-documented challenges faced by Greensill in recent weeks, Taulia has worked closely with its funding partners to ensure that its former Greensill-funded programs have continued access to cash,” 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 for customers and make them less. dependent on a single financial institution.

“Taulia’s priority, above all, has been to enable businesses large and small to unlock the cash trapped in their supply chain in order to invest, operate and prosper,” said Managing Director 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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