Credit Suisse says Greensill recovery will cost clients $291m

Switzerland's second largest bank is braced for five years of court battles and disputed insurance claims. © Keystone / Walter Bieri

Credit Suisse has warned clients that its effort to recover the money it lent via failed finance company Greensill Capital will cost $291 million, as the Swiss bank braces for five years of long court battles and contested insurance claims.

The total is more than double its previous estimate of $145 million, which it had said it would spend in a year, and is a blow to the bank’s wealthy clients who already face billions of dollars of losses from the $10 billion of supply chain finance funds it set up with Greensill.

“The revised provisions cover a term until 2026, a much longer term than the initial provisions, which explains the increase versus the previously disclosed figures,” the bank said in an update to clients on Monday.

Credit Suisse last year suspended a $10 billion suite of supply chain finance funds linked to Greensill, which collapsed into administration amid allegations of fraud.

While $7.3 billion has been collected, the bank has warned that about $2 billion will be difficult to recoup. The decision to make clients shoulder the extra costs has spread further discontent among the funds’ 1,200 investors. They were told by the bank’s advisers and in marketing material that they were investing in low-risk products, fully insured against losses.

The costs include legal and restructuring advisory fees, insolvency fees and money paid to prop up Greensill and pay its skeleton staff, which last year cost $10 million.

“It’s devastating that the investors are paying for all these expenses that are based on a mess up by Credit Suisse,” one investor in the funds told the Financial Times. “Most importantly, a big chunk of these expenses are keeping Greensill alive.”

Skeleton staff necessary

If a skeleton staff at Greensill is not kept on, the bank says it would not be able to claim for non-payment of invoices under the company’s insurance policies.

“The recovery work that Credit Suisse continues to prioritise on behalf of fund investors inevitably incurs external expenses,” the bank said on Monday. “Credit Suisse is fronting as much of this expense as possible and will seek to recoup the amount that we have incurred when appropriate.”

In an attempt to quell investor anger, Credit Suisse introduced a fee waiver programme for clients invested in the funds, which led to a CHF29 million ($30 million) hit to the bank’s revenues in the first three months of the year.

Credit Suisse has identified $2.3 billion linked to three debtors — industrialist Sanjeev Gupta’s troubled GFG Alliance, US mining business Bluestone Resources and SoftBank-backed construction company Katerra — that has been difficult to recoup.

It signed an agreement last month with Bluestone to start recovering part of the $690 million that the group owned by West Virginia governor Jim Justice owes to the Swiss bank’s clients.

Insurance claims

The settlement — which will see Bluestone paying back $260 million over two years and Credit Suisse clients being entitled to share the proceeds of any sale of the mining business — was the result of year-long talks between Credit Suisse negotiators and the Justice family.

Credit Suisse is also pursuing embattled UK metals tycoon Sanjeev Gupta for $1.3 billion that his GFG Alliance borrowed from the bank’s funds through Greensill.

A further $440 million is owed by Katerra, which filed for bankruptcy with more than $1 billion of liabilities last June. Credit Suisse has launched legal action against SoftBank, the Japanese conglomerate whose $100 billion Vision Fund backed Katerra.

The bank has also filed 16 insurance claims.

Copyright The Financial Times Limited 2022