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SoftBank

SoftBank exits Credit Suisse funds after circular financing review

Japanese group pulls $500m from vehicles that bet on start-ups its Vision Fund backed

SoftBank's decision comes after the Swiss bank completed a review of the circular financing arrangement.    © Reuters

LONDON (Financial Times) -- SoftBank has redeemed its investment in Credit Suisse funds that made big bets on the debt of start-ups backed by the Japanese technology conglomerate's Vision Fund, after the Swiss bank completed a review of the circular financing arrangement.

Credit Suisse launched the review after the Financial Times revealed that SoftBank had invested more than $500m of its own money into the more than $7.5bn range of investment vehicles.

The funds in turn provided large amounts of financing to several start-ups in which the $100bn Vision Fund held stakes, including companies hit hard during the coronavirus crisis such as Indian hotel business Oyo.

Credit Suisse touts these funds to professional investors, such as corporate treasurers, as a safe place to park their cash because the companies whose short-term debt they invest in are seemingly diversified.

The funds' investments have to date been solely sourced through Greensill Capital, a Vision Fund-backed finance company that employs former UK prime minister David Cameron as an adviser, through an agreement dating back to 2017.

In a letter to investors on Monday, Credit Suisse reassured them they had "suffered no losses as a result of these relationships", but said it had determined that roughly 15 per cent of the funds' assets were invested in companies in which SoftBank's Vision Fund held minority stakes.

The bank wrote that it intended to update the funds' investment guidelines to reduce their maximum exposure limits to a single company, including "those backed by the Vision Fund", subject to regulatory approval.

The letter also said one investor - which people familiar with the matter said was SoftBank - had "redeemed its investment in full". Credit Suisse has also terminated an agreement with SoftBank struck in April, which the letter said "formally precluded" the funds from sourcing investments from parties other than Greensill.

"We note reports that Credit Suisse has completed its review which concluded that it has full confidence both in the supply chain finance funds and Credit Suisse Asset Management's overall control structure," Greensill Capital said.

"We also welcome the steps that are being taken in the interests of all investors. We have built a very strong partnership with Credit Suisse over the past four years and are proud that the supply chain finance funds have delivered consistently strong returns for investors during this time."

SoftBank declined to comment. Credit Suisse referred to the investor letter.

Australian financier Lex Greensill cemented his status as a paper billionaire last year when SoftBank's Vision Fund invested $1.5bn into his eponymous firm, which he founded in 2011. Greensill Capital specialises in supply-chain finance, where businesses borrow money to pay their suppliers.

Credit Suisse told investors this year that a group of insurers and Greensill itself were covering a number of defaults in the funds that occurred after the SoftBank-backed group's clients collapsed, including former FTSE 100 company NMC Health.

Greensill-linked debts were at the heart of a 2018 scandal in the Swiss asset management industry, when Zurich-based GAM was forced to liquidate a fund that had invested in illiquid bonds the London-based finance firm had arranged for Sanjeev Gupta's companies. The Credit Suisse funds also provide financing to the Indian-born entrepreneur's industrial and commodities trading businesses.

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