Fri 04/22/2022 04:59 AM
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Greensill post-reorg update from Reorg's EMEA Core Credit Team

Relevant Document:
Tokio Marine Release

Investors in Credit Suisse supply chain funds are considering launching litigation against the bank to recover $2.2 billion in outstanding claims relating to the collapse of Greensill Capital last year, according to sources.

The investors, who are typically high net worth individuals and family offices, have become concerned by a slowdown in cash disbursements and Credit Suisse’s assertion that its own litigation to enforce against Greensill debtors and the company’s insurers will take up to five years, with investors unlikely to recover all their money.

Reorg understands that law firm Pallas LLP is representing a large group of the investors and is preparing a claim to recover shortfalls.

To date, Credit Suisse has made around $6.7 billion in distributions to investors. However, sources say further recovery will be harder since Credit Suisse may struggle to recover proceeds under insurance policies taken out to cover Greensill clients. The Swiss bank had previously said it expects that “litigation will be necessary to enforce claims against individual debtors and the insurance companies.” The bank has begun submitting claims to its credit insurers which would, in theory, increase the amount of funds recoverable to investors.

However, insurer Tokio Marine claimed in early April that policies issued via its subsidiary the Bond & Credit Co., or BCC, are void since they were obtained by fraudulent misrepresentation. The insurer explained it would “avoid multiple insurance policies fraudulently obtained by companies connected with Lex Greensill.”

Tokio Marine was the first insurer to pull the plug on Credit Suisse when it declined to renew $4.6 billion of credit insurance policies covering 40 Greensill clients in March 2021. Greensill sought, and was refused, an injunction in New South Wales to compel BCC to renew the policies. The loss of the Tokyo Marine cover made it “commercially impossible” for Greensill to sell non-investment grade receivables to investors, according to the company’s U.K. application for administration last year.

Evidence submitted to U.K. Parliament shows that Tokio Marine was one of 27 insurers to Greensill via its insurance broker Marsh. Sources say that other insurers are considering following the example of Tokyo Marine and may view their policies as void. This will further reduce the funds available to satisfy investor claims.

Tokio Marine says it will “vigorously defend” any claims against it and against BCC relating to policies purportedly issued to Greensill. “This includes the claims that are the subject of pending proceedings in Australia against Insurance Australia Limited to which BCC has recently been joined.” The Australian proceedings have been brought by Greensill’s German administrator Michael Frege and a number of Greensill’s client companies including GFG Alliance. Credit Suisse recently joined the action.

Insurance Australia, which sold BCC to Tokio Marine in 2019, maintains that it has no net insurance exposure to trade credit policies sold through BCC.

Credit Suisse’s own litigation in the U.S. against Softbank relates to its involvement in a 2020 restructuring of a Greensill receivables client Katerra, which resulted in losses to Credit Suisse. The case remains in the pre-action discovery phase. Credit Suisse seeks evidence for use in an English case which has yet to be launched.

–Shan Qureshi, Connor Lovell
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