Bloomberg — SoftBank Group Corp. urged a U.S. judge to block Credit Suisse Group AG from conducting a “fishing expedition” in a simmering dispute over the collapse of Greensill Capital.
Zurich-based Credit Suisse is seeking internal records from SoftBank as it prepares to file a lawsuit in England to recover losses from last year’s implosion of financier Lex Greensill’s supply-chain finance empire.
The Tokyo-based holding company said in a filing late Friday in San Francisco federal court that a subpoena prepared by the Swiss bank is nothing more than a “desperate” attempt to deflect responsibility for the “embarrassing” loss of hundreds of millions of dollars in the Greensill collapse.
SoftBank claims Credit Suisse persuaded a magistrate judge in early January to allow the subpoena under the false promise that its U.K. lawsuit was to be filed imminently.
In reality, Credit Suisse’s information gathering is a “baseless fishing expedition aimed at manufacturing claims” against SoftBank, according to the filing. The subpoena should be rejected, SoftBank said, because Credit Suisse should pursue the documents it wants from the English court where it intends to file suit -- and where SoftBank can fight it.
A spokesperson for Credit Suisse declined to comment to Bloomberg. The company faces a deadline next month to respond to SoftBank’s arguments.
Credit Suisse’s “broad-based” demand for information “appears designed to try and identify potential claims, rather than provide specific information required” to start the lawsuit in England, SoftBank said.
Credit Suisse is seeking information from board meetings at Katerra Inc., a U.S.-based construction company in which SoftBank was a major investor. The bank is trying to reclaim $2.7 billion in overdue loan payments from borrowers including Katerra. It has said it invested in about $440 million worth of notes backed by the construction company.
The Swiss bank has alleged that SoftBank “orchestrated a financial restructuring of Katerra in late 2020″ in which the two companies, along with Greensill, “agreed, improperly, to cancel the Katerra receivables program and purported to forgive the amounts outstanding under that program” that were due to Credit Suisse. In exchange, Greensill received shares in a Katerra entity.
Friday’s filing contains flow charts in which SoftBank details transactions between various entities -- funds and special purpose vehicles -- and how they invested in Katerra, which was incorporated in the Cayman Islands.
In 2020, as Katerra was in financial distress and at risk of default, it hired restructuring advisers, according to the filing. In November of that year, a SoftBank entity transferred $440 million to a Greensill subsidiary to shield the company’s creditors and funding sources from losses tied to Katerra and facilitate a restructuring of Katerra’s debt obligations, SoftBank said.
The purpose of the transaction was, at least in part, to shift the risk of economic loss from Credit Suisse to SoftBank, the Japanese company said. But in January 2021, SoftBank learned for the first time that as Katerra continued to falter it had not used the $440 million infusion to buy back the notes Credit Suisse purchased.
Instead, Greensill transferred the money to its various entities, including one in Germany that was under investigation. Any harm to Credit Suisse was an unintended “collateral consequence” of the transaction, SoftBank said.
Credit Suisse cut ties with SoftBank in May, deciding to no longer do any new business together, after the collapse of Greensill and amid conflict of interest allegations, people with knowledge of the decisions earlier told Bloomberg.
The Swiss bank has repaid $6.7 billion to investors in supply-chain funds affected by Greensill’s failure.
The case is In re Ex Parte Application of Credit Suisse Virtuoso, 21-mc-80308, U.S. District Court, Northern District of California (San Francisco).
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