In a $440 million dispute, Credit Suisse intensifies its legal claim against SoftBank

In order to recover hundreds of millions of dollars that it had lent through the now-defunct finance company Greensill Capital on behalf of its wealthiest clients, Credit Suisse has intensified its legal battle with SoftBank.

According to three people with knowledge of the action, Credit Suisse lawyers submitted an application to the English High Court last week asking for permission to file formal legal proceedings against the Japanese tech investor.

The claims concern $440 million in Credit Suisse client funds that Greensill loaned to Katerra, a US construction company that later filed for bankruptcy with over $1 billion in liabilities. SoftBank's $100 billion Vision Fund provided support for Katerra.

When Credit Suisse asked judges in California and Arizona to compel Katerra to hand over documents relating to an agreement that SoftBank struck with Greensill in 2020 to bail out the struggling construction business, Credit Suisse made clear its intention to pursue SoftBank through the English courts.

The case's escalation is the most recent indicator of the breakdown in the relationship between Credit Suisse and SoftBank, which was once one of the Swiss lender's most important clients.

An interpersonal conflict between Masayoshi Son, the CEO of SoftBank, and Thomas Gottstein, the former CEO of Credit Suisse who resigned last month, is at the center of Credit Suisse's claim.

The disagreement centers on a last-minute cash infusion that SoftBank agreed to give Greensill in late 2020. Greensill used that money to lend struggling Katerra money that it had initially borrowed from Credit Suisse clients.

Greensill agreed to write off Katerra's debt as part of the agreement in exchange for a small stake in the construction company, which later filed for bankruptcy last June. The $440 million in cash from SoftBank, as reported by The Financial Times last year, never made it to the Swiss bank's clients.

In US filings, Credit Suisse claims that SoftBank orchestrated a financial restructuring of Katerra that favored the Japanese group at the expense of the clients of the Swiss bank.

In the US filings, Credit Suisse asserts a "material discrepancy" between Son's alleged denial of "all knowledge of the Katerra" deal in a meeting with Gottstein last September and an email from Greensill founder Lex Greensill in December 2019 claiming the SoftBank CEO had approved it.

A UK judge had to grant Credit Suisse permission to file a lawsuit against SoftBank because Greensill, not the bank, was the one who actually loaned its clients money. It will likely be a few months before Credit Suisse is able to move forward.

According to people familiar with their thinking, SoftBank's lawyers have thus far dismissed Credit Suisse's attempts to obtain information through US courts as a "fishing expedition," reasoning that the bank had little intention of initiating proceedings in London and that it is attempting to deflect attention from its own subpar investment choices.

In June, a judge in California gave Credit Suisse until August 12 to demonstrate its intent to file a lawsuit in the UK.

SoftBank and Credit Suisse declined to comment.

When Greensill failed in the spring of last year, trapping the $10 billion that Credit Suisse was managing on behalf of 1,200 of its wealthiest clients, it was forced to shut down a number of supply-chain finance funds. It has warned clients that legal proceedings and disputed insurance claims may last up to five years as it continues to seek to recover more than $2.5 billion.

The bank informed its customers last month that recovering the funds would cost them $291 million.

By fLEXI tEAM