Credit Suisse is preparing its first insurance claims on losses stemming from its $10bn of funds tied to collapsed finance group Greensill Capital, according to people with knowledge of the process.
The Swiss bank is trying to recoup billions of dollars owed to the group of supply-chain finance funds, which it was forced to close in March.
While its recovery team is mainly focused on negotiating with debtors to recover money on behalf of more than 1,000 investors, it has also started the process of claiming on the related insurance, primarily from Japanese group Tokio Marine, the people said.
The claims will test the trade credit insurance that was a vital component of Greensill’s securitisation machine.
The Credit Suisse funds invested in packaged-up invoices sourced by Greensill, a supply-chain finance specialist, which then arranged insurance to cover non-payment of the invoices. Greensill fell into administration in March after its main coverage, provided by Tokio Marine unit The Bond & Credit Co, expired.
Credit Suisse has indicated that $2.3bn linked to three debtors — industrialist Sanjeev Gupta’s GFG Alliance, US mining business Bluestone Resources and SoftBank-backed construction company Katerra — is proving hard to recoup.
The first insurance claims Credit Suisse are preparing are not linked to the three named debtors, according to people briefed on the process, though Katerra’s recent filing for US bankruptcy protection could spur future claims on the $440m the construction group owes the Credit Suisse funds.
The Swiss bank is also preparing for litigation against SoftBank over the Katerra debt, as the Financial Times has reported, which could run in parallel with any insurance claims.
“The whole process takes a long time, so we want to cover all bases in order to reclaim investors’ funds,” said a person with knowledge of Credit Suisse’s plans.
“In a situation like this where there’s a lot at stake, you want to make sure that all the Is are dotted and Ts crossed from a legal perspective. You want to make sure they are not going to be thrown out on a technicality.”
It also emerged in March that BCC’s lead underwriter for Greensill had been dismissed last year for allegedly exceeding his risk limits, triggering an urgent investigation by Tokio Marine to establish the size and extent of its exposure.
The same underwriter had previously been personally lobbied by David Cameron, the former UK prime minister who was an adviser to Greensill.
The insurer said later in March that it was questioning the “validity” of the cover, in the wake of a criminal complaint against the management of Greensill’s German subsidiary Greensill Bank by the German financial regulator.
Tokio Marine said on Tuesday that it had a “general policy not to comment on individual policyholder relationships or policy terms”, but that it did not anticipate any material impact from Greensill’s collapse “for the 2021 fiscal year and onwards”.
“As stated in our update in March, we are actively investigating the validity of all policies and we are fully reserving our rights,” the insurer said.
Although Greensill arranged the insurance, Credit Suisse paid the premiums and is entitled to claim under the policies, according to people familiar with the recovery process.
They added that Greensill’s administrator, Grant Thornton, would also be involved in submitting the claims.
The bank’s position is that funding against “future receivables” — a controversial form of lending offered by Greensill against invoices not yet submitted — are protected by insurance. Tokio Marine has said publicly only that the insurance “covers the accounts receivable of the insured”.
Credit Suisse has so far returned $4.8bn to investors in the funds, who include some of its most prized ultra-rich clients. Several have threatened to sue the bank over the issue.
The bank had planned to return up to $1bn more to investors by mid-June, but the payment has been delayed.
Grant Thornton, which declined to comment, has said that processing insurance claims on defaulting debtors would be a key part of its recovery work for creditors. Credit Suisse declined to comment.