Credit Suisse is preparing its first insurance claims for losses stemming from its $ 10 billion in funds tied to the collapsed financial group Greensill Capital, according to litigants.
The Swiss bank is trying to collect billions it owes to the group of supply chain finance funds that it had to close in March.
While its recovery team is mainly focused on negotiating with debtors to reclaim money on behalf of more than 1,000 investors, it has also started claiming appropriate insurance, mostly from Japanese group Tokio Marine, people said.
The claims will test trade credit insurance, which was an integral part of Greensill’s securitization engine.
Credit Suisse funds invested in packaged invoices from Greensill, a supply chain finance specialist, who then arranged insurance against non-payment of the invoices. Greensill was administered in March after its main coverage, provided by Tokyo Marines unit The Bond & Credit Co, expired.
Credit Suisse has stated that the $ 2.3 billion related to three debtors – the GFG Alliance of industrialist Sanjeev Gupta, US mining company Bluestone Resources and SoftBank-backed construction company Katerra – are difficult to collect .
The first insurance claims that Credit Suisse is preparing are not related to the three named debtors, according to people notified of the process, although Katerra’s recent filing for US bankruptcy protection future claims for the $ 440 million that the construction company owes the funds of Credit Suisse, could boost.
The Swiss bank is also preparing for a lawsuit against SoftBank over the Katerra debt, as the Financial Times reported, which could run parallel to any insurance claims.
“The whole process takes a long time, so we want to cover all the basics in order to reclaim investors’ money,” says a person who knows Credit Suisse’s plans.
“In a situation like this, where the stakes are high, you want to make sure that all of the I’s and Ts are crossed from a legal standpoint. You want to make sure that they are not thrown away for technical reasons. ”
It was also revealed in March that BCC’s senior underwriter for Greensill had been fired last year for allegedly exceeding his risk limits, sparking an urgent investigation by Tokio Marine to determine the scope and extent of his involvement.
The same underwriter had previously been personally lobbyed by David Cameron, former UK Prime Minister and advisor to Greensill.
The insurer said later in March that it was questioning the “validity” of the coverage after German financial regulators filed a criminal complaint against the management of Greensill’s German subsidiary, Greensill Bank.
Tokio Marine said Tuesday that it has a “general policy of not commenting on individual policyholder relationships or terms” but that it does not expect the Greensill collapse to have a material impact “in fiscal year 2021 and beyond.”
“As stated in our March update, we are actively investigating the validity of all policies and fully reserve our rights,” said the insurer.
Although Greensill arranged the insurance, Credit Suisse paid the premiums and is entitled to make claims under the policies, according to people familiar with the recovery process.
They added that Greensill’s administrator Grant Thornton would also be involved in filing the claims.
The bank believes that the financing of “future claims” – a controversial form of lending that Greensill offers against invoices not yet submitted – is covered by insurance. Tokio Marine has only said publicly that the insurance “covers the claims of the insured”.
Credit Suisse has repaid $ 4.8 billion to investors in the funds, including some of its most valuable ultra-rich clients. Several have threatened to sue the bank over the problem.
The bank had planned to return up to $ 1 billion more to investors by mid-June, but payment has been delayed.
Refusing to comment, Grant Thornton said processing insurance claims against defaulting debtors would be an important part of his debt recovery work for creditors. Credit Suisse declined to comment.