Credit Suisse cuts its business with SoftBank and its founder, Masayoshi Son

Credit Suisse CS -2.06%

Group AG and SoftBank 9984 -0.80%

Group Corp. CEO Masayoshi Son recently dissolved a long-standing personal loan relationship and the bank cracked down on transactions with his company, according to regulatory documents and people familiar with the matter.

The moves came after the collapse of SoftBank-backed Greensill Capital in March threw Credit Suisse into confusion. It also follows Credit Suisse’s $ 5.5 billion loss from trading by the family-owned Archegos Capital Management office. Since then, the bank has promised to reduce risk.

Son had long used Credit Suisse and other banks to borrow money against the value of their significant holdings in SoftBank. As recently as February, Son had about $ 3 billion of his shares in the company pledged as collateral with Credit Suisse, one of the largest amounts of any bank, according to Japanese securities documents. The equity loan relationship dates back almost 20 years. By May, those loans had been reduced to zero.

They are still holding substantial stock promises with a handful of other banks, according to the documents. It could not be known who initiated the completion of the equity pledges with Credit Suisse.

A SoftBank spokesperson declined to comment.

Credit Suisse also took steps to reduce its relationship with SoftBank as a corporate client, according to people familiar with the matter. Credit Suisse now requires any business involving SoftBank to go through additional levels of risk checks and approvals, amounting to an informal ban on new business, the people said.

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The Japanese conglomerate invests in dozens of tech companies around the world and is one of the most prolific sources of deals and loans for Wall Street banks. His holdings span the world of technology, from private trips to Uber Technologies. INC.,

to drug developers and chip designers. He’s also had major setbacks, including the owner of the WeWork office.

Credit Suisse has served as a financial advisor to SoftBank and companies supported by its $ 100 billion Vision Fund. It competes with other banks to take those companies public or raise other funding, based on regulatory filings and deal announcements.

In many ways, SoftBank and Mr. Son are the exact type of clients Credit Suisse is targeting. The bank aims to turn personal loans to wealthy entrepreneurs into larger, more lucrative deals from its corporate holdings.

The relationship has been strained in recent months by Greensill’s collapse, according to people familiar with the matter. Bloomberg News reported in May, Credit Suisse would not do any new business with SoftBank.

The issues arose in the summer of 2020 when Credit Suisse executives reviewed potential conflicts of interest around $ 10 billion of mutual funds the bank managed with Greensill.

Archegos and how it revolutionized the markets

A SoftBank investment in one of the Credit Suisse funds essentially turned the Japanese company into a lender and borrower, as other companies in which it invested also received financing. SoftBank redeemed its investment after the review and Credit Suisse said it was committed to protecting investors.

Credit Suisse froze Greensill’s funds in March when the finance firm lost a key type of credit insurance backing the funds. The freeze bankrupted Greensill and left Credit Suisse struggling to recover money on behalf of the fund’s investors, including pension funds and corporate treasurers.

Credit Suisse has said it is working to get the money back and has so far recovered more than half of the $ 10 billion in equity from investors.

Part of that recovery is focused on companies backed by SoftBank, including construction technology company Katerra. He owed $ 440 million to Credit Suisse funds.

When Katerra ran into financial difficulties last year, Greensill forgave the loan, Akacceleratorfund previously reported. SoftBank, in turn, invested $ 440 million in Greensill, hoping the money would go to investors in the Credit Suisse fund.

SoftBank’s strategy of investing mountains of cash in promising young companies to create big winners has failed dramatically at WeWork and is inviting scrutiny from the fund’s other investments. Here’s a look at the structure of the Vision Fund and how its fast-paced investment strategy could make it risky. (Video of 12/11/19)

Instead, Greensill put the proceeds of SoftBank’s investment in a bank it owned in Bremen, Germany, according to a bankruptcy administrator’s report. The report said Greensill had used the money it received from SoftBank, including $ 440 million, to boost its bank’s capital position and fund Greensill’s overall operations.

Much of Mr. Son’s vast personal wealth comes from his nearly 30% stake in SoftBank. Currently, Forbes lists him as the richest man in Japan, with Tadashi Yanai, founder of Asia’s top clothing retailer, Fast Retailing Co., with a net worth of around $ 35 billion.

The brash Mr. Son has always taken big risks, say people who have known him for years. It invests aggressively in a variety of companies and often uses its shares to guarantee loans, one of the people said. Over the years, Son has bought several expensive houses in Tokyo, including one that he outfitted with an indoor golf course that could simulate weather conditions like rain.

In 2012, he paid $ 117 million for a mansion near billionaire Larry Ellison’s home in Woodside, California, at the time when the most paid for a house in the US In recent years, he has also invested personally billions of dollars in Vision Fund.

Son and related vehicles reduced total SoftBank shares pledged from 271 million to 197 million between February and May, according to filings. Its other share-based lenders include Nomura Holdings INC.,

UBS Group AG and Mizuho Financial Group INC.,

according to the presentations.

In March of last year, the proportion of Mr. Son’s SoftBank holdings pledged as collateral rose to 72% as SoftBank’s share price plummeted and banks asked for more collateral.

Shares of the Japanese tech conglomerate have tripled since then, and Son is now pledging just under 40% of its total SoftBank holdings as collateral, documents show, suggesting any restrictions on its assets have been eased.

Write to Margot Patrick at [email protected] and Phred Dvorak at [email protected]

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