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Credit Suisse Sued in Japan Regarding Bonds Linked to Greensill
July 10, 2023
Credit Suisse (CS) was sued in Japan last Friday over bonds linked to a fund it managed with the now-defunct Greensill Capital. The Yamazaki Marunouchi Law Office filed the lawsuit on behalf of a Japanese company and its founder, seeking roughly $49mn in damages. In the lawsuit, CS was alleged to have provided incorrect product explanations when it sold the bonds, whose returns were dependent on the performance of a supply chain finance fund which later failed. According to the complaint, the plaintiffs bought four kinds of such bonds without knowledge that the fund was investing in not only securities backed by account receivables, but also those backed by future receivables, as it was neither reflected in the product manuals nor explained by the securities salesperson. Future receivables are said to be a riskier investment as it is guaranteed on sales that have not yet occurred. Furthermore, a limit-loss clause embedded into the bonds failed to work the way CS said it would. Hence, the complaint calls for the cancellation of the bond sales contract and full principal repayment by CS as a result of these inaccurate explanations. This lawsuit highlights the legal obstacles that remain for CS as well as for UBS who finalized the acquisition of CS last month. The acquisition means that provision of any financial compensation or damages will have to be done by UBS. For instance, UBS had to pay a penalty last month over a massive writedown of $4.7bn tied to the collapsed Archegos Capital by CS.
UBS’s 3.875% Perps are currently trading at 77.7 cents on the dollar, yielding 13.5% to call.
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