Credit Suisse is winding down Greensill-affiliated funds valued at $ 10 billion

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ZURICH (Reuters) – Credit Suisse announced on Friday that it was winding up its $ 10 billion supply chain finance funds, which were mainly invested in bonds backed by specialist finance firm Greensill.

FILE PHOTO: Greensill Bank is pictured in downtown Bremen on July 3, 2019. REUTERS / Fabian Bimmer

The London-based Greensill Group is preparing to file for bankruptcy and is in talks to sell parts of its business to US private equity firm Apollo Global Management Inc.

Greensill did not want to comment on the bankruptcy preparations or the change of Credit Suisse. Apollo also declined to comment.

“The fund management boards have now decided to dissolve the funds. Credit Suisse Asset Management’s priority is to strike a balance between liquidating funds in a timely manner and maximizing value for investors, ”said the Swiss bank’s funds division.

Credit Suisse asset management added in a statement on Friday that it is closing the funds due to valuation uncertainties, limited availability of insurance coverage for new investments and challenges in finding suitable investments.

The second-largest bank in Switzerland suspended the withdrawal of funds supporting Greensill’s lending operations on Monday due to concerns about its exact valuation and announced on Wednesday that it would return excess cash to shareholders.

INSURANCE COVERAGE

Credit Suisse said the funds had “lower insurance coverage for new investments” but declined to say whether existing investments were protected.

How much money investors win back in the funds to be closed can depend on the insurance coverage of the investments.

The funds offer loans backed by blue chip companies but also by high leverage companies that are not rated by major credit institutions, including Sanjeev Gupta’s GFG Alliance.

GFG did not want to comment on Greensill’s problems, but said it had alternative funding options for its business.

Bond and Credit Company (BCC), a unit of Japan’s Tokyo Navy, had covered $ 4.6 billion in Greensill credits, according to an Australian court ruling denying Greensill’s motion that BCC’s former partner, Insurance Australia Group (IAG) to be forced to expand insurance coverage.

Tokyo told Greensill last year that it had opened an investigation into whether the insurance it offered was approved in line with the company’s procedures, court documents showed.

Tokyo Marine declined to comment. Insurance Australia said the sale of its BCC stake in 2019 meant IAG had no further economic interest or exposure to commercial credit insurance. Greensill declined to answer questions about insurance matters.

APOLLO PLANS

Apollo has already started funding Greensill’s customers, whom they intend to continue working with once the purchase of Greensill’s operations is complete, a source familiar with the acquisition talks said.

The private equity group, best known for buying troubled assets especially after the 2008 financial crisis, plans to manage the Greensill process through its partner insurance company Athene, the source added.

Apollo manages the invested assets of Athene, a New York listed insurer. It will pick some of the more attractive assets out of Greensill’s loan portfolio, the source said.

Another source said Apollo will prioritize investment grade customers through Athene Greensill, and anything below that is likely not to be included.

An Apollo spokesman declined to comment.

Credit Suisse said there were more than 1,000 investors in the four liquidated funds, all institutional or professional, and it would begin paying out cash in installments starting March 8.

Cash, or cash equivalents, made up roughly $ 3.7 billion of the four Credit Suisse funds worth $ 10.1 billion last week, a statement to investors revealed.

Reporting by Brenna Hughes Neghaiwi, Abhinav Ramnarayan, and Tom Bergin; Edited by Riham Alkousaa, John Revill and Alexander Smith

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