Greensill says he warned Credit Suisse weeks before the collapse

This content was published on March 13, 2021 – 12:00

(Bloomberg) – Lex Greensill said he told senior officials at Credit Suisse Group AG about his struggles to secure new insurance to cover the business loans that underpin his business for weeks before his empire collapsed sharply financial supply chain.

The ex-billionaire has “regularly updated” executives, including Lara Warner, chief risk officer, on her problems finding new coverage after Australian insurer Bond and Credit Company decides not to renew policies on $ 4.6 billion in business loans. The Swiss bank “was aware of the difficulties Greensill Capital was having in renewing TBCC policies and the likely consequences of not renewing,” the financier said in recently disclosed court documents.

The documents add a new twist to a saga that rocked the markets when Credit Suisse froze $ 10 billion in funds on March 1 due to valuation uncertainties. The decision came the same day an Australian court dismissed a last-minute attempt by Greensill to force the insurer to provide more coverage. Credit Suisse is now returning about $ 3.7 billion in cash the funds held, but has not specified how much of investors’ money will ultimately be returned or when they will get it.

Credit Suisse declined to comment. In a statement posted on its website, the bank said it had only been made aware “very recently” of the lapse of insurance amid Greensill’s downfall.

The scandal continues to spread across the bank and claimed some victims at the start. Credit Suisse has temporarily replaced three employees in its fund-related asset management unit. Michel Degen, head of asset management in Switzerland and EMEA, has been replaced by interim by Filippo Rima, according to a person familiar with the matter. Luc Mathys, responsible for the unit’s obligations, was also suspended from his duties, said the person concerned. He launched an internal investigation into the collapse of the supply chain finance strategy.

The scandal also raises new questions about the company’s risk management after a series of missteps and Warner’s role after signing a $ 140 million loan to Greensill in late October, canceling some risk managers, said recently people familiar with the matter. As one of the most prominent executives of the Tidjane Thiam era to remain after the Ivorian’s departure, she was recently promoted under the leadership of new CEO Thomas Gottstein to Chief Risk Officer and Chief Risk Officer. group compliance – two functions that were previously separate.

See also: Credit Suisse explosions give Gottstein crash course on risk

Warner challenged risk managers to stop thinking only about defending the bank’s capital and also look at strategic business priorities, according to people familiar with the matter. But recent successes – including the collapse of client Luckin Coffee – have raised questions about whether Credit Suisse is prioritizing revenue growth over risk and compliance.

The documents were leaked following a Bloomberg News request for Greensill’s testimony during the director nomination process. He described the events that led to the collapse of his eponymous business as “something of a perfect storm”.

In the statement, Greensill also disclosed a loan of 110 million euros ($ 131 million) taken out last July by Greensill Capital from Greensill Bank AG, the company’s German lender. As of the end of February, $ 108.6 million of what he described as a “revolving factoring loan agreement” was underway. The loan matures at the end of the year.

Credit Suisse executives also knew early on that a large portion of the funds’ assets were tied to Sanjeev Gupta, a client of Greensill whose borrowing was at the center of a 2018 scandal at rival asset manager GAM Holding AG. , Bloomberg reported. About a third of the strategy’s flagship product assets were tied to Gupta’s GFG Alliance companies or its clients as of April 2018, according to a file.

On November 5, Greensill agreed with Credit Suisse to pay up to $ 390 million for any shortfall due to the default of its assets. The document shows that the financier would pay the shortfall “to the extent that” Bond and Credit Company denies any claims. Compensation was provided in a letter to the Nova Lux Fund of Credit Suisse.

(Updates with details of the Greensill Bank loan in the ninth paragraph.)

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