By Brenna Hughes Neghaiwi, Carolyn Cohn and Oliver Hirt
ZURICH (Reuters) – Credit Suisse may have to file an indictment over its dealings with Greensill, he warned on Tuesday, as investor attention intensified over its dealings with the UK-based finance company chain d supply that has sunk into insolvency.
The Swiss bank has had to shut down around $ 10 billion of supply chain finance funds that purchased Greensill-issued notes that it marketed to its customers. He’s also trying to claw back a $ 140 million loan he made to the company last year.
“Although these issues are still at an early stage, we would like to note that it is possible that Credit Suisse will incur costs for these matters,” he said.
Greensill filed for bankruptcy last week after losing insurance coverage for its debt repackaging business.
Credit Suisse’s share price has fallen more than 10% since it announced the suspension of its supply chain funds on March 1. It has paid investors about $ 3.1 billion in redemptions from the four funds so far, and has announced that it will announce new upcoming cash distributions. month.
The bank also said on Tuesday that, “contrary to some reports,” its chief risk and compliance officer Lara Warner was not aware until February 22 that insurance related to Greensill could expire on March 1.
Greensill founder Lex Greensill said in a court filing last week that he kept senior Credit Suisse executives, including Warner, informed of the funds’ insurance coverage in the “weeks” leading up to his claim. insolvency on March 8.
The collapse put new pressure on Credit Suisse chief executive Thomas Gottstein, who tried to squeeze the bank out of a string of headlines, covering a spy scandal that ousted his predecessor Tidjane Thiam at a $ 450 million depreciation on a hedge fund investment. .
The level of oversight and risk management applied to the bank’s asset management division is under scrutiny, especially since Gottstein ordered a review of the Greensill funds last year.
Supply chain finance, or reverse factoring, is a method by which businesses can get money from banks and funds like Greensill to pay their suppliers without having to dip into their working capital. See EXPLAINER:
Greensill had a strong exposure to a client, GFG Alliance, which is controlled by steel tycoon Sanjeev Gupta and has started to default on its debts, according to Greensill’s insolvency claim. Gupta said on Friday that the conglomerate was in talks with Greensill directors on a standstill agreement to suspend payment of its debt to Greensill for an agreed period.
COTS ‘IMPOSSIBLE To estimate’
The saga eclipsed what was otherwise a good start to the year for Credit Suisse, whose shares opened 1.8% on Tuesday, claiming to have reached the highest level of pre-tax income in January and February in a decade. .
Andreas Venditti, analyst at Bank Vontobel, said the bank was facing a loss of investor confidence.
“The Greensill affair cost Credit Suisse around three billion francs in market capitalization. Investors have reassessed the risks the bank is exposed to. In the worst case, the bank faces years of litigation,” a- he declared.
“It is currently virtually impossible to estimate how high the direct costs of the deal will be for Credit Suisse. Investors do not like uncertainty.”
Three Credit Suisse investors told Reuters they were concerned about the fallout for the bank. They declined to be named due to the sensitivity of the matter.
An investor in Credit Suisse debt said the main financial risk was to the bank’s reputation, which he said was a key asset to the wealth management business.
A Credit Suisse shareholder said the bank should fully compensate investors in supply chain funds. A second equity investor said that in addition to reputational risk, he was concerned about the effect of the Greensill collapse on the bank’s future increase in assets and benchmarks in the growing industry of socially responsible investing.
Credit Suisse declined to comment beyond its statements.
The bank hired outside companies to help deal with regulators and insurers amid questions about the contracts that underpinned Greensill’s security. He also clawed back some $ 50 million from the $ 140 million bridging loan, he said, leaving his outstanding secured loan at $ 90 million.
Credit Suisse said on Tuesday that its asset management division, which sold the funds to investors, was working closely with Greensill administrator Grant Thornton and other parties to facilitate the recovery of the funds. .
Japanese insurer Tokio Marine, which provided $ 4.6 billion in coverage to Greensill’s credit scores through an Australian unit, is investigating the validity of those policies. A person familiar with the matter said these are directly related to Credit Suisse funds.
(Reporting by Brenna Hughes Neghaiwi and Oliver Hirt in Zurich, and Carolyn Cohn in London; additional reporting by Simon Jessop in London and Tom Sims and Patricia Uhlig in Frankfurt; Editing by Michael Shields and Pravin Char)