SoftBank-backed supply chain finance firm Greensill Capital has experienced a bevy of customers default in well-known accounting scandals and corporate meltdowns, the Financial Times (FT) reported.
The British financing company put funding in place for “rent-to-own” merchant BrightHouse and hospital operator NMC Health — firms that have recently become insolvent.
In addition, Greensill provided financing to commodities trader Agritrade, which fell apart earlier in 2020 in the midst of claims of fraud from lenders.
Now, Greensill and insurers have to cover losses in Credit Suisse-managed funds. That firm’s asset management section depends only on Greensill to get its supply chain finance investment opportunities.
Credit Suisse Asset Management noted per FT that those funds experienced “a very strong positive performance year-to-date” and came out ahead of “almost all fixed-income markets and peers.” The firm also noted that the funds possess a “thorough investment and due diligence process” as well as being “broadly diversified.”
As of March’s conclusion, Credit Suisse’s primarily $5 billion supply chain finance fund had 15 percent of assets in the debts of four firms that took in funding from SoftBank.
The investment bank’s audited yearly accounts illustrate that two of the four vehicles had a nearly $120 million of exposure to BrightHouse, Agritrade, and NMC Health overall at October’s close. Additionally, the financial firm’s funds offer sizable portions of funding to companies controlled by the $100 billion SoftBank Vision Fund, one of the biggest shareholders of Greensill.
Last year, news surfaced that Moody’s Investors Service concluded that supply chain finance, which is also called reverse factoring, can possibly weaken liquidity and limit visibility for shareholders as well as investors.
Moody’s noted that few companies disclose their use of the supply chain financing tool, as others might not sufficiently understand the risks associated with it.
Reverse factoring reportedly contributed to high-profile defaults with the inclusion of Abengoa, the Spanish energy firm, and Carillion in Britain.
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