Suspicious invoices were accepted by Credit Suisse for the $140 million Greensill loan

Credit Suisse gave Greensill Capital an emergency $140 million loan based in part on invoices from entities that dispute ever conducting the activity described on the documents.

Less than five months before the demise of Greensill, a supply chain finance company that counts former British prime minister David Cameron as a senior adviser, the Swiss bank provided the loan in October 2020.

According to documents reviewed by people familiar with the deal, invoices generated by metals tycoon Sanjeev Gupta's Liberty Commodities and sold to Greensill served as some of the loan's collateral. However, a  number of the parties listed on the invoices stated that they had no dealings with Liberty.

The apparent oversight that questionable invoices were pledged as collateral sheds new information on Credit Suisse's risk management shortcomings.

Additionally, it raises new concerns regarding the policies at Greensill and Liberty. The Serious Fraud Office in the UK and the French authorities are looking into Gupta's GFG Alliance, which includes the commodities firm, for possible fraud and money laundering. Any impropriety has always been refuted by GFG.

A requirement of the Credit Suisse loan stated that the value of the collateral must be equal to or higher than the $140 million borrowed. Invoices on Greensill's balance sheet were only eligible to contribute to this total under the provisions of the financing agreement if the party mentioned on the bill had an investment-grade rating.

Credit Suisse issued a schedule of receivables dated February 2021 in the days before Greensill's bankruptcy, listing $99 million of these potential bills with the names of 12 different companies.

Invoices of seven of these businesses that Liberty Commodities sold to Greensill were seeen and four of them,  Cargill, Mitsui Bussan Metals, Toyota Tsusho Asia Pacific, and Itochu Singapore, said that they have no history of dealing with Liberty Commodities. The others either declined to comment or were unavailable.

Itochu added that Grant Thornton, the administrator of Greensill, contacted it in March 2021 to confirm one of the Liberty Commodities invoices. The Japanese trading house reportedly replied by stating that its Singaporean subsidiary had no record of the transaction and that it had "checked more widely with other local subsidiaries within the region and affiliated companies but there was no business transaction."

Even after one of its largest clients, Swiss commodities trader Trafigura, alerted the bank that Liberty Commodities looked to have raised funding through Greensill using a dubious invoice, Credit Suisse accepted the bills as collateral.

Last year, it was reported that questionable Liberty Commodities invoices were found in Credit Suisse's Greensill-linked supply chain finance funds. The lender's investment banking branch used the same bills as collateral for a business loan it gave to Greensill, which has not previously been disclosed.

The $140 million loan has already been repaid despite the dubious collateral since Credit Suisse has first-class security on other Greensill assets, including $50 million in cash.

Credit Suisse stated that "Credit Suisse Asset Management has continued to work tirelessly on the recovery of cash for investors in the supply chain finance funds."

"The recovery of the bridge loan made to Greensill Capital, in full, plus interest owed, is further evidence of our absolute determination to seek recourse from this matter wherever we can." 

"Greensill’s facility expressly permitted Prospective Receivables," according to GFG Alliance. The phrase describes a process whereby Greensill permitted some enterprises to get loans secured by fictitious future invoices.

Although Liberty Commodities did not have a "future receivables" facility with Greensill, according to a document Credit Suisse supplied to investors last year, financing could only be raised against current bills.

The invoices obtained by the FT all make reference to nickel sales that were purportedly completed already and provide specifics regarding the time and location of the metal delivery.

The administrator of Greensill revealed this year that $355 million of the $490 million in receivables listed on its balance sheet at the time of its failure were "amounts owed by GFG company obligors."

Grant Thornton, Grensil's administrator, declined to comment.

By fLEXI tEAM