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Vision Fund injected at least $ 400 million into Greensill Capital at the end of last year, according to people familiar with the matter, deepening the potential losses that the tech investor faces in the startup’s collapse.
The cash injection was added to the $ 1.5 billion that Vision Fund had invested in Greensill in 2019. The money, not previously reported, was used as a financial barrier when another Vision Fund company came close to failing to pay a loan to Greensill, the people said.
Greensill, which specializes in making short-term cash advance loans to companies, filed for bankruptcy this week after regulators took over their banking unit and Credit Suisse Group AG
froze investment funds essential to the startup’s operations.
Greensill has packaged corporate loans into bonds, known as notes, which were bought by Credit Suisse funds and sold to investors as low-risk money market-type investments.
SoftBank, founded by billionaire Masayoshi Son, is a giant in the investment area, with interests that include microchips, autonomous cars, 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. In addition to Greensill, this includes 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 Vision Fund and Greensill. SoftBank is preparing to write off 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 plucked their money out of Credit Suisse’s funds, taking Greensill from an important source of off-balance sheet financing. SoftBank invested $ 1.5 billion in Credit Suisse-Greensill funds to help keep them in operation, the Journal reported last week.
That money was separated from the $ 1.5 billion investment from SoftBank’s Vision Fund made directly in Greensill in two parts in 2019.
Greensill used the Credit Suisse funds to lend to other SoftBank Vision Fund companies. Credit Suisse funds added about $ 750 million in loans to finance the supply chain for Vision Fund companies at the end of March 2020, according to fund documents sent to investors.
This included the self-financing company Fair Financial Corp.; Indian hotel chain Oyo Hotels & Homes; See glass manufacturer Inc.
; and the Chinese auto trading platform Chehaoduo Group.
In essence, SoftBank was Greensill’s largest external financier, a lender through Credit Suisse funds and a borrower through its Vision Fund companies.
The multiple functions generated a review within Credit Suisse that led to changes around how 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 Vision Fund was Katerra, a factory-based construction contractor based in the United States. In December, SoftBank put $ 200 million at the start of construction 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 return for a 5% stake in the company.
It was unclear how Greensill would absorb the loss by forgiving the loan.
SoftBank’s $ 400 million injection into Greensill was in the form of convertible debt, one person said. The money was intended to offset Katerra’s inability to pay Greensill and would protect Credit Suisse investors from losses on any notes linked to Katerra, some people familiar with the matter said.
Vision Fund executives have long talked about the potential benefits to be gained from the collaboration of their investee companies. Greensill’s fallout shows that the reality has been more complicated.
Greensill’s collapse also highlights the risks of Vision Fund’s outsized bets on unproven companies. It had to reduce the value of other challenging investments, including office owner WeWork and Oyo Hotels.
Despite its setbacks, the tech giant has made several notable gains. In the last quarter of 2020, Vision Fund posted a $ 13 billion gain in its investments. He is likely to earn multiples from his 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 proved to be a success.
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