Credit Suisse Warns Greensill Investors of Long Legal Fight

(Bloomberg) -- Credit Suisse Group AG says investors in its Greensill-linked funds should brace for a five-year fight with insurers and problem borrowers.

The Swiss lender said that investors should brace for a long drawn-out battle to get their cash back, in a letter responding to shareholder questions that was released on Monday. The letter came as the insurer with the largest exposure to the funds, Tokio Marine Holdings Inc., published a separate statement saying it didn't expect to have to pay out anything.

Investors in the supply chain finance funds run by Credit Suisse and Greensill have much of their money still locked up a year after the specialty lender collapsed. Only around 65% of the firm's largest fund investing in Greensill-related assets, with $7.2 billion under management, had been returned to investors at the end of February.

“It is expected that litigation will be necessary to enforce claims against individual debtors and the insurance companies, which may take around five years,” the Swiss lender said in the letter.

The payout that the investors are likely to receive depends on whether money can be procured from “difficult debtors” or if insurers are willing to pay up on notes they covered. Without money from one of those two sources investors could be stuck with heavy losses, on funds that pitched themselves as very low risk.

Tokio Marine, the main provider of insurance to Greensill through a subsidiary, said that it won't be paying out on the claims. There was a “fraudulent failure” by the lender to provide material documents before the start or renewal of some trade credit insurance policies, the firm said in the statement on Monday.

Tokio Marine and Insurance Australia Group Ltd. were listed as the trade credit insurers on funds that purchased securitized receivables from Greensill. Nearly all of the insurance that Greensill had covering its notes came from Bond & Credit Company, a small Australian insurance firm sold by IAG to Tokio Marine in 2019.

“It is our firm position that the relevant insurance policies are valid and that the insurers' claims are unfounded,” a spokesperson for Credit Suisse said in an emailed statement. “We will take every step to preserve the rights of the Supply Chain Finance Funds and their investors and we will vigorously defend our position.”

IAG said that it would “work together” with the Japanese company, but maintained that it had has no net insurance exposure to trade credit policies sold through BCC.