SoftBank Group Corps
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Vision Fund injected at least $ 400 million into Greensill Capital late last year, according to people familiar with the case, adding to the potential losses faced by the giant tech investor in the startup’s collapse.
The cash infusion came in addition to the $ 1.5 billion that the Vision Fund had invested in Greensill in 2019. The money, not previously reported, was used as a financial backstop when another Vision Fund company nearly defaulted on a loan to Greensill, the people said.
Greensill, which specialized in providing short-term cash advance loans to businesses, filed for insolvency this week after regulators took over the banking division and Credit Suisse Group. AG
froze investment funds critical to the startup’s operations.
Greensill packaged loans to securities companies, known as notes, which were bought by the Credit Suisse funds and sold to investors as low risk money market style investments.
Founded by billionaire Masayoshi Son, SoftBank is an investment giant with interests spanning microchips, self-driving cars, satellites, e-commerce and cell phone networks. The Japanese conglomerate’s $ 100 billion Vision Fund and a smaller successor fund have invested in more than 80 companies. This includes Uber Technologies in addition to Greensill Inc.
and TikTok owner ByteDance Ltd.
The $ 400 million was the latest in a long line of complex financial arrangements between the 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 case.
In March 2020, when Covid-19 hit the markets, investors withdrew their money from the Credit Suisse funds, undermining a major source of off-balance-sheet financing for Greensill. SoftBank has put $ 1.5 billion into the Credit Suisse-Greensill funds to help run them, the Journal reported last week.
That money was separate from the $ 1.5 billion investment that SoftBank’s Vision Fund made directly into Greensill in two installments in 2019.
Greensill used the Credit Suisse funds to provide loans to other SoftBank Vision Fund companies. The Credit Suisse funds had a total of approximately $ 750 million in supply chain finance loans to Vision Fund companies at the end of March 2020, according to fund documents sent to investors.
These include the auto finance company Fair Financial Corp .; Indian hotel chain Oyo Hotels & Homes; glass manufacturer View Inc.
And the Chinese online car trading platform Chehaoduo Group.
In essence, SoftBank was Greensill’s largest outside financier, a lender through the Credit Suisse funds and a borrower through the Vision Fund companies.
The different roles led to an overhaul within Credit Suisse that led to changes in the way the fund operated, the Journal reported last year. SoftBank repaid its position in the funds last July, although loans to the Vision Fund companies continued.
Another Greensill borrower from the Vision Fund was US-based Katerra, a factory assembly contractor. In December, SoftBank put $ 200 million into construction start-up to avoid bankruptcy. Katerra’s chief executive told the Journal at the time that Greensill had also forgiven $ 435 million in funding in exchange for an approximately 5% stake in the company.
It was not clear how Greensill would make up for the loss of forgiving the loan.
SoftBank’s $ 400 million injection into Greensill was done in the form of convertible debt, one said. The money was intended to make up for Katerra’s inability to repay Greensill, and it would protect Credit Suisse’s investors from loss on Katerra-bound notes, some people familiar with the case said.
Vision Fund executives have long talked about the potential benefits that can be achieved through the collaboration between the companies invested in. The consequences of Greensill show that reality has been more complicated.
Greensill’s collapse also highlights the risks of the Vision Fund’s outsized bets on unproven companies. It has had to write off the value of other challenged investments, including office boss WeWork and Oyo Hotels.
Despite its setbacks, the giant technology investor has made several remarkable gains. In the last quarter of 2020, the Vision Fund posted a profit of $ 13 billion on its investments. It will likely earn multiples on its investment in South Korean e-commerce company Coupang Inc., which is expected to be made public shortly at a valuation of more than $ 50 billion. Meal delivery service DoorDash Inc.,
that went public earlier this year also turned out to be a hit.
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