Revelations in a U.K. television documentary on the collapse of supply-chain financier Greensill Capital show Credit Suisse may struggle to recover some of the money owed to investors in the Swiss bank’s supply chain funds.

A «BBC» documentary broadcast Monday said internal documents show collapsed supply-chain lender Greensill Capital knew its main obliger, metals magnate Sanjeev Gupta’s GFG Alliance, was in financial trouble by the start of 2020 because it was unable to make payments on Greensill loans.

Investors held around $10.1 billion in Credit Suisse’s supply-chain funds when they were closed in March following the collapse of Greensill Capital which used money from the funds to lend to its clients.  GFG owes the funds $1.2 billion.

The Swiss bank's CEO, Thomas Gottstein, has said recovering investors' money is its top priority. Credit Suisse has so far returned $5.9 billion.

Missed GFG Payments Covered

Greensill used its own money to cover repayments GFG could not afford, leaving investors unaware of the problems, the BBC said. It quoted an email sent by a Greensill finance officer to a senior manager in April 2020 as saying that the unusual payments had been going on for four months.

A second email sent at the start of May proposed that an insolvency practitioner should be sent in to review Gupta's businesses, the broadcaster said. Lex Greensill, the founder of Greensill Capital, told the BBC he was unaware his staff had recommended sending in an insolvency practitioner to GFG.

Loans Not Secured by Invoices

A Credit Suisse prospectus for the funds dated April 2020 said the funds entailed «limited credit risk given multiple layers of protection: underlying notes are secured by claim against the debtor and guaranteed by an insurance company.»

However, the BBC quoted U.S. court papers as showing that between 2018 and 2021, only $70 million of the $850 million Greensill lent U.S. coal company Bluestone Resources owned by West Virginia Governor Jim Justice was backed by actual invoices.

The remainder was only backed by predicted future coal sales. Lex Greensill told the BBC the predicted Bluestone business was all «based upon future trade that was likely to occur with current customers».

Not Obliged

However, the BBC obtained the names of the companies that Lex Greensill said were current customers of Bluestone. Six of the companies said they were not Bluestone customers and weren't planning to buy coal from it in the future.

Lex Greensill later told the BBC the coal buyers did not have to be current customers. Bluestone only had to state it expected to make the sales at some future point and his company was not obliged to make checks, he said.

Greensill denied misleading investors. He said his company made all the appropriate disclosures to Credit Suisse which was «solely responsible for making any disclosures to their investors». He said the loans were always secured against assets and personal guarantees and were backed up by insurance that would pay 100% of any shortfall.

Insurance Policies

Tokio Marine, a Japanese insurer came to own the insurance policies on the Greensill loans through its acquisition of Bond & Credit Company in 2019. A Sydney-based executive, Greg Brereton, underwrote much of the vital credit insurance to Greensill at BCC. After the acquisition, Tokio Marine fired Brereton after finding he had exceeded his risk limits by underwriting as much as A$10 billion ($7.6 billion) for Greensill.

«We continue to assess the validity of cover extended to Greensill,» a spokesman for Tokio Marine said in June. The collapse of Greensill itself doesn’t crystalize any exposure for the insurer, he said. «Tokio Marine will continue to assess the validity of the cover extended to Greensill.»

Fraud Probes

The insurance position has been further compounded by investigations into potential fraud surrounding the collapse of Greensill Capital. German financial regulator Bafin has filed a complaint with prosecutors about over suspected balance sheet manipulation at Bremen-based Greensill Bank.

In the U.K. the Serious Fraud Office has launched an investigation into the financing of Gupta’s metals empire, including its links to Greensill Capital.