SoftBank Invested More Than $500M In Credit Suisse's Funds That Finance Vision Funds' Startups

SoftBank Group Corp SFTBY invested more than $500 million into Credit Suisse Group AG’s CS $7.5 billion range of supply-chain finance funds, which the bank, in turn, invested in the debt of the Japanese company’s struggling Vision Fund start-ups.

What Happened

At the end of March, the main supply chain finance fund of Credit Suisse had 15% of its $5.2 billion assets invested in Vision Fund companies, while four of its top 10 largest exposures were to such firms, according to Nikkei Asian Review.

The Swiss bank marketed these funds to professional investors as a safe place to invest cash in the short-term debt of what appeared to be diversified companies. 

Credit Suisse’s fund bolstered its exposure to SoftBank’s $100 billion Vision Fund over the past year, at a time when $18 billion was erased from the equity value of the SoftBank supported companies. 

Why It Matters

According to the Review, at the heart of the circular investment is a firm called Greensill Capital, a specialist in supply-chain finance, which is backed by the Vision Fund and employs David Cameron, a former British prime minister, as an advisor. 

Greensill picks the assets that comprise Credit Suisse’s funds portfolio under a 2017 agreement.

SoftBank has been able to pay the suppliers of Vision Fund companies upfront through such funds, with the assistance of other investors who were also financing other companies.

External investors are exposed to risk if Vision Fund companies default on debt, and the investment could be termed problematic if the investors were unaware of the arrangement.

Price Action 

On Friday, SoftBank OTC shares closed 1.54% higher at $23.70.

Credit Suisse shares closed 2.36% higher at $9.97 on Friday.