Credit Suisse is trying to secure access to crucial bank accounts that sit at the heart of Sanjeev Gupta’s steel empire, but is being thwarted by the administrators for Greensill Capital.
Administrators Grant Thornton have control over the accounts at Citigroup, which were used to pass on up to $1.3bn in debt repayments from Gupta’s companies and disperse them to funds that Credit Suisse ran with Greensill.
The $10bn suite of supply-chain funds were backed by invoices from Greensill’s clients, including Gupta. Credit Suisse executives fear that Gupta has been able to access the accounts as part of a side deal the industrialist negotiated with Greensill.
Under unusual terms, Greensill offered some of its clients access to these accounts even though the money they paid into them was supposed to flow automatically into the Credit Suisse funds, according to people with knowledge of the terms.
Credit Suisse managers only became aware of the unconventional arrangement after the bank suspended the funds at the start of March.
As Gupta’s steel empire verges on collapse — having had its funding from Greensill choked off and failing to convince the UK government to bail it out — Credit Suisse believes Gupta is using the accounts to keep parts of his business going, according to people familiar with the matter.
Gupta, Grant Thornton and Credit Suisse were heading into crunch talks on Thursday as the former commodities trader once dubbed the “saviour of British steel” tried to negotiate a standstill agreement with his creditors that will decide the fate of his various companies.
This week Citi filed a flurry of applications in London’s insolvency court to wind up parts of Gupta’s commodities and industrial businesses, under instruction from Credit Suisse, according to people briefed on the decisions. Citi is the trustee of bond-like products sold by Greensill that were packaged up in Credit Suisse’s supply-chain finance funds.
Grant Thornton has also written letters to customers of GFG’s businesses, seen by the Financial Times, calling on them to stop paying the companies and instead divert the payments to Greensill.
“You are instructed to disregard any instructions from Liberty that may be inconsistent or in conflict with our instructions,” read one of the letters sent to customers of Liberty Steel on Tuesday.
As part of its efforts to reclaim money owed to the supply-chain funds, Credit Suisse has also been contacting debtors, calling on them to pay back the funds rather than send money directly to GFG companies.
Credit Suisse said in a statement on Wednesday that it would make another repayment to investors by mid-April, adding to the $3.1bn already returned. Its four supply-chain finance funds now have $1.5bn in cash or cash equivalents after inflows from maturing receivables.
While the lender said it expected the majority of the original $10bn of client money to be recovered in the liquidation process, it warned it was considering legal action and exploring other options to expedite the repayments.
GFG said it was “in constructive discussions with Grant Thornton, Greensill’s administrators, to negotiate a consensual and amicable solution on the way forward, which is in the best interests of all stakeholders”.
Grant Thornton and Credit Suisse declined to comment.
Additional reporting by Stephen Morris in London