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Supply chain finance world rocked by Greensill woes

Working capital finance provider Greensill Capital looks to be facing a liquidity crunch as two Swiss-headquartered investment firms have suspended funds it used.

Credit Suisse suspends subfunds

Greensill, which counts former UK Prime Minister David Cameron as a senior advisor, says it "uses the power of financial markets to unlock capital on terms that fit the needs of our clients, from 20 days to 20 years and beyond."

However, a statement from Credit Suisse on Monday noted that, in order to protect the interests of all investors in the Credit Suisse supply chain finance funds, Credit Suisse Asset Management fund boards have suspended the redemptions and subscriptions in these funds. Shareholders of the Credit Suisse Nova (Lux) Supply Chain Finance High Income Fund and the Credit Suisse Nova (Lux) Supply Chain Finance Investment Grade Fund, which reportedly hold approximately US$10bn billion in investment funds with Greensill assets, were notified of the suspension on Monday. The Credit Suisse supply chain finance funds are only distributed to qualified investors.

"It is the fiduciary responsibility of Credit Suisse Asset Management to act in the best interest of investors in its funds," reads the Credit Suisse press release. "A certain part of the Subfunds’ assets is currently subject to considerable uncertainties with respect to their accurate valuation. Therefore, to prevent any detriment to the Subfunds and their investors as might result from such valuation uncertainty, it has been decided to suspend the calculation of the Net Asset Value per Share as well as the issuance, redemption and conversion of Shares from or into the Subfunds with effect as of 1st March 2021."

GAM winds down Greensill fund

Following the news out of Credit Suisse, Zurich-headquartered GAM Investments announced on Tuesday that it has closed the GAM Greensill Supply Chain Finance fund to subscriptions and redemptions as a result of recent market developments and resulting media coverage related to supply chain finance. 

GAM says it will ensure that all clients are treated fairly and is embarking on the process of returning their full investment to them in an orderly manner.

The fund is an investment grade only strategy with payment obligations from globally recognised multinational corporations. The assets are fully insured against default by third party insurers with a minimum credit rating of single-A. The GAM statement stresses there are no concerns regarding the valuation of the assets in the fund. The fund was available to qualified investors only and currently has a total of US$842m of assets with less than ten clients in the fund. GAM’s associated run rate revenues from this fund are approximately CHF1m per annum. GAM said that it was immediately waiving future fees on the fund.

All assets within the fund have a final maturity of 12 months or less, with a weighted average life of less than 60 days and are held and protected in Luxembourg-domiciled structures.

The closure of the Supply Chain Finance fund marks the end of GAM’s business relationship with Greensill, which dates back to 2016.

“Clients are at the heart of our business at GAM and we have taken the decision to close our Supply Chain Finance fund as we believe this is in the best interests of all clients in the fund," commented Peter Sanderson, group chief executive officer at GAM. "Our portfolio is comprised of investment grade assets and we do not have any valuation concerns. As such we anticipate an orderly fund liquidation and return of client assets in the normal course.”

In a report on the UK steel industry, and Sanjeev Gupta's GFG Alliance group of which Greensill is a primary source of finance, the BBC website writes:

"Sources close to the situation told the BBC that Greensill was in serious financial trouble and that it would "not be wrong to surmise that it was likely to go into administration"."

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