UBS plans to set aside roughly $900 million in the second quarter to reimburse investors in Credit Suisse funds linked to the collapsed supply chain financing firm Greensill Capital, the Swiss bank said Monday.
The amount accounts for 90% of what investors are owed, said UBS, which inherited the issue when it acquired Credit Suisse over the past year. Now, UBS is offering to repay a significant portion of the nearly $2.5 billion that remains stuck in investment funds tied to Greensill. Clients have received more than $7 billion in trapped funds since Greensill collapsed in 2021.
The payouts will not affect UBS’s financial results or capital position, as it had already taken a markdown, the bank clarified. The investment in the supply chain finance funds will be managed as part of UBS’s non-core and legacy portfolio, the bank said.
“The offer aims to give fund investors certainty, an accelerated exit from their positions and a high level of financial recovery,” UBS said in a statement Monday. “It will allow an early exit from fund investments compared to distributions under the ongoing recovery process.”
Greensill investors will be redeemed at 90% of the net asset value determined Feb. 25, 2021, “net of any payments made to the fund investors since then, through newly established feeder subfunds,” the bank said. The offer began Monday and will extend through July 31.
UBS has said it expects to pay as much as $4 billion in legal liabilities as a result of acquiring Credit Suisse. The acquisition closed May 31.
Credit Suisse and Greensill operated $10 billion investment funds backed by supply-chain financing before Greensill abruptly declared bankruptcy in March 2021. The Swiss bank had persuaded 1,200 wealthy clients to invest in funds marketed as low-risk, as they were backed by insurance contracts underwritten by Greensill. However, when insurers decided not to renew Greensill's coverage in 2021, the business collapsed.
Credit Suisse said it expects the process of recouping Greensill-tied dollars to extend until at least 2031, costing $321 million — up from a previous estimate of $291 million. These costs will be borne by the fund investors, the Financial Times reported.
Also in March 2021, another Credit Suisse client, Archegos Capital Management, defaulted on $5.5 billion in trading positions, throwing the bank into a two-year spiral before the Swiss government moved in to bail out the embattled bank.
The twin scandals prompted some leadership changes at the bank’s executive board.
The Federal Reserve fined UBS $268.5 million in July 2023 for “unsafe and unsound counterparty credit risk management practices” between Credit Suisse and Archegos.
