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Credit Suisse to Wind Down Frozen Greensill-Linked Funds

This content was published on March 5, 2021 - 08:11

(Bloomberg) -- Credit Suisse Group AG plans to wind down a $10 billion group of supply chain finance funds linked to financier Lex Greensill that it suspended this week because of valuation concerns.

The Swiss bank said it will make the first payments to investors -- amounting to approximately 80% of the available cash and cash equivalents -- on Monday for the Luxembourg-domiciled funds and later next week for the Liechtenstein-domiciled fund, according to a statement on Friday.

The bank previously indicated the funds had about $3.7 billion in cash and equivalents.

Credit Suisse earlier this week suspended redemptions, in part because a major insurer for the securities in the funds refused to provide coverage on new notes. The decision sent ripple effects across the globe and prompted Greensill Capital to seek a buyer for its operations. The parent company is currently in talks on its survival and is in the process of filing for insolvency in the U.K., people familiar with the matter said.

Swiss asset manager GAM Holding AG also decided to shutter its $842 million GAM Greensill Supply Chain Finance Fund and return client money.

Credit Suisse shares fell 1.5% at 9:07 a.m. in Zurich trading. The stock has lost 2.7% in the past week, compared with a small gain for UBS Group AG, it’s closest rival.

In an update to investors earlier this week, Credit Suisse said that it was looking for ways to return cash in the funds. It also said that Greensill’s German Bank -- which has effectively been shuttered by regulators -- was one of the insured parties and plays a role in the claims process for some of the remaining notes. That could complicate efforts to returning more money quickly, analysts have said.

Many of the assets in the funds have such protection to make them more appealing for investors seeking alternatives to money markets. But the second-biggest of them, the High Income Fund, doesn’t use insurance. It’s also the fund with the least liquidity, with less than 20% of the net assets in cash.

Credit Suisse has said that the loss of insurance was one of several factors prompting the freeze. It said it wasn’t aware of any evidence suggesting financial irregularities with the papers issued by Greensill or by the underlying companies. The bank hasn’t commented on how many of the assets in the funds are tied to Sanjeev Gupta’s GFG Alliance, an early client of Greensill’s whose extensive borrowings from that firm have been a focus of German regulators.

(Adds shares in sixth paragraph, reasons for fund freeze in last.)

©2021 Bloomberg L.P.

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