dChan - Q Origins Project Archive

>>9617412 pb SoftBank invests in Credit Suisse funds that finance its technology bets

SoftBank Used 'Circular Financing' Scheme To Prop Up Struggling Vision Fund Companies

Just imagine for a second that you're the treasurer or CFO of a mid-sized corporation, and your looking for somewhere to park money where you can earn a decent return without taking too much risk. One of the Credit Suisse corporate bankers comes to you one day with an idea. They call it "supply-chain financing".

The new strategy is essentially just another tool to help companies more "flexibility" in managing their short-term financing needs. It's a fool-proof idea, the banker explains, because even if the companies default, there are all kinds of insurance policies and other safeguards in place to help make the lenders whole. So you invest. A few years later, your banker calls with some bad news. Four of the 10 companies to which the fund was most heavily exposed imploded, and are likely headed for liquidation. It could be years before the lenders are made whole - if ever - and you and your fellow unlucky investors are simply along for the ride, but you can probably kiss that money goodbye. Several months later, you open the FT, only to discover that many of the other investors in the fund, as well as the advisor managing the fund, were all financially linked to the companies in which the fund was investing. The circular flow of money from the funds to the companies' suppliers means that, for these other investors, any losses stemming from loan defaults have already been offset, since they're basically paying themselves...with your money.

Well, that appears to be what happened to some investors who weren't too happy when they found out that several Credit Suisse 'supply chain finance' funds were essentially part of an elaborate shell game orchestrated by SoftBank to help inflate the value of Vision Fund portfolio companies by making them look more financially healthy than they actually were.

SoftBank effectively used these Credit Suisse funds - which were administered by Greensill Capital, an investment firm that, bizarrely, received a $1.5 billion slug of cash from VF. Aside from being run by an Aussie "paper billionaire" and advised by former Tory PM David Cameron, it's not clear exactly what Greensill is supposed to be doing with all that money. But the company has managed to find itself enmeshed in all sorts of skullduggery uncovered by the intrepid reporters at the FT. Four of the CS's supply chain finance funds' top investments were tied to Vision Fund portfolio companies. investors (well, the investors who aren't SoftBank) have pulled $1.5 billion from the Greensill-managed Credit Suisse funds as several of Greensill's investments went sideways. Another interesting thing about Greensill: former British PM David Cameron is a paid advisor.

But now, the firm has hit upon a new strategy that just might revive the sagging fortunes of the SoftBank-backed lender.

'Clients have withdrawn more than $1.5bn from these supply-chain finance funds this year, after a string of Greensill Capital’s clients defaulted on their debts in high-profile corporate collapses and accounting scandals, such as former FTSE 100 company NMC Health. Credit Suisse has told investors that a group of insurers and Greensill itself are covering losses in the funds. Australian financier Lex Greensill founded the company in 2011 and cemented his status as a paper billionaire last year when SoftBank’s Vision Fund invested $1.5bn into his eponymous firm. Greensill Capital specialises in supply-chain finance, where businesses borrow money to pay their suppliers. This week the British Business Bank approved Greensill to provide so-called “invoice finance” through the UK’s Coronavirus Large Business Interruption Loan scheme. “Making sure capital reaches the real economy, where it is needed most, is integral to Britain’s broader economic recovery,” Mr Greensill said of the decision.

There's nothing like extracting rents from government capital intended for the "real economy" to help keep a small, politically connected lender afloat.

https://www.zerohedge.com/markets/softbanks-used-credit-suisse-funds-dupe-investors-and-cushion-vision-fund-companies