SoftBank Group Body
The Vision Fund injected at least $ 400 million into Greensill Capital late last year, according to people familiar with the matter, deepening the potential losses faced by the tech investment giant in the startup’s collapse.
The cash infusion added to the $ 1.5 billion Vision Fund had invested in Greensill in 2019. The money, previously unreported, was used as financial backing when another Vision Fund company nearly defaulted on a loan. to Greensill, the people said.
Greensill, which specialized in making short-term business loans in the form of cash advances, filed for insolvency this week after regulators took over its banking unit and Credit Suisse Group. AG
He froze investment funds critical to the startup’s operations.
Greensill packaged the business loans in securities, known as notes, which were bought by Credit Suisse funds and sold to investors as low-risk, money-market-style investments.
SoftBank, founded by billionaire Masayoshi Son, is an investment giant, with interests spanning microchips, autonomous vehicles, satellites, e-commerce, and mobile phone networks. The Japanese conglomerate’s $ 100 billion Vision Fund and a smaller successor fund have invested in more than 80 companies. Besides Greensill, these include Uber Technologies Inc.
and the owner of TikTok, ByteDance Ltd.
The $ 400 million was the latest in a long series of complex financial deals between the Vision Fund and Greensill. SoftBank is preparing to score its investment in Greensill, The Wall Street Journal reported last week, citing a person familiar with the matter.
In March 2020, when Covid-19 hit the markets, investors withdrew their money from Credit Suisse funds, undermining Greensill as a key source of off-balance sheet funding. SoftBank invested $ 1.5 billion in Credit Suisse-Greensill funds to help keep them operational, the Journal reported last week.
That money was separated from the $ 1.5 billion investment that SoftBank’s Vision Fund made directly into Greensill in two parts in 2019.
Greensill used Credit Suisse funds to make loans to other SoftBank Vision Fund companies. The Credit Suisse funds had a total of about $ 750 million in supply chain finance loans to Vision Fund companies at the end of March 2020, according to fund documents sent to investors.
Among them are the self-financing company Fair Financial Corp .; The Indian hotel chain Oyo Hotels & Homes; See glass manufacturer Inc.
; and the Chinese online car trading platform Chehaoduo Group.
In essence, SoftBank was Greensill’s largest outside sponsor, a lender through Credit Suisse funds and a borrower through its Vision Fund companies.
The multiple roles prompted a review within Credit Suisse that led to changes in the way the fund operated, the Journal reported last year. SoftBank redeemed its position in the funds in July last year, although loans to Vision Fund companies continued.
Another Greensill borrower from the Vision Fund was Katerra, a US-based factory assembly construction contractor. In December, SoftBank invested $ 200 million in the construction start-up to help it avoid bankruptcy. Katerra’s chief executive told the Journal at the time that Greensill had also forgiven $ 435 million in financing in exchange for a roughly 5% stake in the company.
It was unclear how Greensill would absorb the loss from the loan forgiveness.
SoftBank’s $ 400 million injection into Greensill was in the form of convertible debt, one of the people said. The money was used to offset Katerra’s inability to pay Greensill back and would protect Credit Suisse investors against losses on the notes linked to Katerra, some people familiar with the matter said.
Executives at Vision Fund have long talked about the potential benefits to be gained from engaging their investee companies. Greensill’s fallout shows that reality has been more complicated.
Greensill’s collapse also highlights the risks of the Vision Fund’s huge bets on unproven companies. You’ve had to write down the value of other challenged investments, including office owner WeWork and Oyo Hotels.
Despite its setbacks, the giant tech investor has made several notable gains. In the last quarter of 2020, the Vision Fund posted a $ 13 billion profit on its investments. You will likely get multiples of your investment in South Korean e-commerce company Coupang Inc., which is expected to go public soon with a valuation of more than $ 50 billion. DoorDash Meal Delivery Service Inc.,
which went public earlier this year, also turned out to be a success.
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