The Swiss bank maintains myriad links to the controversial Japanese conglomerate. finews.asia attempts to unravel the skein.
Credit Suisse is visibly nervous about its links to Softbank: the Swiss lender is poised to unwind at least some ties to the Tokyo-based conglomerate founded and led by Masayoshi Son, as finews.asia reported last week.
This would represent just one strand of the unbelievably deep and complex relationship between the Swiss bank and Softbank spanning three continents. It serves as a reminder of the perils of «one-bank,» or piping as much of Credit Suisse’s three main units to wealthy clients as possible.
The Softbank case reveals a particularly tangled web that threatens to damage Credit Suisse’s reputation. finews.com attempts to unscramble the ties:
Leveraged Greensill Bet
Credit Suisse is re-evaluating a supply chain finance fund it operates jointly with Greensill Capital. The $7.5 billion fund to capture «reverse factoring» flows. It emerged two weeks ago that Softbank invested in the Credit Suisse funds, which in turn filliped start-ups in its own Vision funds.
This circular relationship wasn’t proactively disclosed to other investors in the Credit Suisse funds. Complicating matters, the Vision Fund pumped $1.4 billion into Greensill itself.
Softbank Stake As Collateral
Credit Suisse deepened the ties by lending to Son himself, the «Financial Times» (behind paywall) reported – the Swiss bank is among Lombard lenders to the Japanese billionaire alongside Julius Baer, J. Safra Sarasin, and Liechtenstein’s LGT. Son, who is worth north of $26 billion, pledged Softbank shares as collateral – reportedly roughly 40 percent of his holdings for loans with 19 wealth managers.
The banks were rattled about the loans at the onset of the corona crisis worldwide in March when Softbank raised alarm and needed to de-lever Softbank. The banks are mum on potential credit losses from lending to Son.
Watertight With Wirecard
Investors in the German payments firm have lost out: the shares have tanked 98 percent this month amid an accounting scandal. The holding company which controls Wirecard filed for insolvency under new management last week – despite Softbank’s backing. Last year, the Japanese firm raised 900 million euros ($1 billion) for Wirecard; the loans were structured by Softbank’s former investment bankers and sold to institutional investors – via Credit Suisse.
The move leaves Credit Suisse on the hook for spreading risk to a wider public. Buyers of the credit instruments are presumably sitting on massive losses – unlike Vision Fund and its backers, which weren’t hit thanks to a clever structuring of the deal.
Lure of Saudi Money
The Credit Suisse-Softbank connection extends to Riyadh: the Swiss bank followed the lure of Saudi Arabian crown prince Mohammed bin Salman’s plans to modernize and diversify from oil. Credit Suisse director Michael Klein is a key adviser to Saudi Arabia, and the bank was involved in the listing of Saudi Aramco.
The wealthy Saudi-based Olayan family is one of Credit Suisse’s longest-standing shareholders. Saudi Arabia’s sovereign wealth fund plowed $45 billion into Softbank’s Vision Fund in the hopes of spurring its financial diversification. After the crash of We and Uber, the value of this stake is notably smaller.
Abu Dhabi’s Connection
Softbank’s and Credit Suisse’s ties pop up three hours east of Riyadh's Al-Yamamah Palace in Abu Dhabi as well. The United Arab Emirates’ wealth fund Mubadala poured $15 billion into the Vision Fund. Mubadala and Credit Suisse are long-time partners: the two jointly operate the Mubadala infrastructure fund, a vehicle that invests in energy, water, transport, and telecoms. Nicole Arnaboldi, a veteran Credit Suisse managing director, sits on the board of the vehicle.
Reporting by Samuel Gerber and Peter Hody
