ZURICH: Credit Suisse Group AG clients pulled more than US$400mil this month from a fund holding short-term corporate loans sourced by Greensill Capital, the firm founded by billionaire financier Lex Greensill.
Assets in the Credit Suisse nova (lux) supply chain finance high income fund fell 27% since the beginning of May, according to data compiled by Bloomberg.
The redemptions come on top of an US$842mil drop in assets between February and April this year.
The fund was one of three supply-chain finance vehicles that lost US$1.6bil to investor withdrawals last month.
Investors can withdraw their cash on a monthly basis, but are required to give the manager at least 10 business days notice beforehand, according to fund documents.
The US$1.1bil high income fund is the riskiest among Credit Suisse supply chain vehicles because investors can be directly exposed to the underlying assets with no insurance. The first 1% loss is covered by Greensill.Chief executive officer Greensill said the firm can absorb the withdrawals as Credit Suisse is just one of the distribution channels for his firm’s products.
“Credit Suisse represents about 15%-20% of our funding activity, given we have around 150 different investors that buy from us, ” Greensill said in an interview.
A spokeswoman for Credit Suisse said in an email that the fund is “outperforming almost all fixed income markets and peers.”
“The funds have not been negatively affected by any credit events as of today and all redemptions have been met, ” she said.
Earlier this year, Greensill covered a loss incurred by Credit Suisse on paper issued by collapsed Singapore commodity trader Agritrade International Pte, according to sources.
The Credit Suisse spokeswoman and a representative for Greensill declined to comment on the Agritrade exposure.
Former Morgan Stanley banker Greensill in 2017 created the bespoke investment funds together with the Swiss lender to draw a wider pool of investors to what’s known as invoice-based lending, also called supply-chain finance.
These strategies effectively buy invoices to companies’ suppliers at a discount, seeking to profit when the debt is paid.
The vehicles make loans – arranged by intermediaries like Greensill, so companies can pay their bills early while boosting cash flow.
Greensill said business has increased since the onset of the Covid-19 pandemic.
“Greensill purchased and securitised US$143bil of receivables in 2019 and in the first four months of 2020 our volumes were up 115% year-on-year, ” he said. — Bloomberg
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