Credit Suisse provided funding for Greensill Capital to set up its own in-house insurance firm, weeks after the supply-chain finance company’s main insurer refused to renew its policy.
The loss of a key insurance policy was one of the main factors that hastened the demise of Greensill last year, triggering a sprawling financial and political scandal that engulfed former British prime minister David Cameron, who earned millions as an adviser to the finance company.
Credit Suisse, which had deep ties with Greensill, provided a $140mn loan to the company in October 2020, less than five months before it collapsed.
Documents seen by the Financial Times show that part of the loan’s proceeds were earmarked for setting up a “captive insurance firm”. This money was intended to support Greensill’s plan to establish its own insurer to provide coverage for the risky lending it carried out, according to people familiar with the matter.
Insurance underpinned the products that Greensill sold to investors, including wealthy clients of Credit Suisse, which poured $10bn into supply-chain finance funds that the Swiss bank largely marketed as safe alternatives to cash.
One person involved in the negotiations around the loan described it as “mind-boggling” that Credit Suisse believed that “Greensill would be allowed to build an insurance company”, given the growing issues it was facing at the time.
On September 1 2020, weeks before Credit Suisse finalised the loan, Australian insurance firm The Bond and Credit Company informed Greensill that it would not renew a crucial policy that expired in six months.
The Bond and Credit Company’s parent company Tokio Marine earlier this year accused Greensill Capital of having “fraudulently obtained” these insurance policies.
The firm’s founder, Lex Greensill, rebutted accusations of fraud at an appearance before British lawmakers investigating the firm’s collapse last year. The Australian financier also hit out at Tokio Marine, telling MPs: “It is deeply regrettable that we were let down by our leading insurer, whose actions ensured Greensill’s collapse.”
Credit Suisse told the FT it was “not informed about any insurance discontinuation until 22 February 2021”.
“Credit Suisse continues to pursue all possible angles in order to recover cash for investors in the supply chain finance funds,” the bank added.
Proceeds from the $140mn corporate loan also repaid previous loans that Credit Suisse’s Australian private banking unit made to Lex Greensill’s family trusts.
Those earlier loans — which documents show were made to The Greensill Corporation Pty Ltd as trustee for the AD Greensill Family Trust and Peter Greensill Family Co Pty Ltd as trustee for the Peter Greensill Family Trust — were brokered by Credit Suisse’s top Australian private banker Shane Galligan, according to people familiar with the matter.
The FT has previously reported that Galligan was also private banker to Sanjeev Gupta, the metals magnate whose company GFG Alliance and its financing arrangements with Greensill Capital are under investigation by the UK’s Serious Fraud Office. GFG has consistently denied allegations of fraud.
The earlier loans could have given Credit Suisse recourse to Greensill’s personal assets, including his family’s farming business in Bundaberg, Australia. Australian corporate filings show that at the time The Greensill Corporation held a 45 per cent stake in the Greensill Farming Group.
This stake was transferred to a newly established entity called Wandoo1 shortly after Greensill Capital collapsed in March 2021, filings show. Wandoo1 also replaced The Greensill Corporation as the sole shareholder of the AD Greensill Family Trust.
While Greensill Capital collapsed months after Credit Suisse made the $140mn loan, it has since been able to recover the money it lent as it had a first ranking charge across the firm’s assets. The FT reported last week that this loan’s collateral included invoices to companies that deny ever doing the business stated on the documents, however.
Credit Suisse has also revamped its risk management safeguards since the collapse of Greensill and the bank losing $5.5bn on the implosion of Archegos Capital a few weeks later.
Greensill Capital’s administrator Grant Thornton and a spokesman for Lex Greensill declined to comment. Galligan did not respond to a request for comment.