Credit Suisse steps up legal claim against SoftBank in $440mn dispute

Credit Suisse has stepped up its legal fight against SoftBank, as the embattled Swiss lender seeks to recoup hundreds of millions of dollars on behalf of its wealthiest clients that it had lent through Greensill Capital, the defunct finance firm.

Credit Suisse lawyers applied to the English High Court last week, seeking permission to initiate formal legal proceedings against the Japanese tech investor, according to three people with knowledge of the move.

The claims relate to $440mn of Credit Suisse client funds that Greensill lent to Katerra, a US construction group that subsequently filed for bankruptcy with more than $1bn in liabilities. Katerra was backed by SoftBank’s $100bn Vision Fund.

Credit Suisse revealed its intention to pursue SoftBank through the English courts late last year when it 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 ailing construction business.

The escalation of the case is the latest sign of deteriorating relations between Credit Suisse and SoftBank, which was once a leading client of the Swiss lender.

At the heart of Credit Suisse’s claim is a personal dispute between SoftBank chief executive Masayoshi Son and Thomas Gottstein, who stepped down as Credit Suisse chief executive last month.

The rift centres on an emergency cash injection that SoftBank agreed in late 2020 to give Greensill, which lent struggling Katerra money that it had originally borrowed from Credit Suisse clients.

As part of the deal, Greensill agreed to write off Katerra’s debt in return for a small stake in the construction group, which went on to file for bankruptcy last June. The Financial Times revealed last year that the $440mn in cash from SoftBank never reached the Swiss bank’s customers.

Credit Suisse alleges in US filings that SoftBank masterminded a financial restructuring of Katerra that benefited the Japanese group at the expense of the Swiss bank’s clients.

According to the US filings, Credit Suisse claims a “material discrepancy” between what it says was Son’s denial of “all knowledge of the Katerra” deal in a meeting last September with Gottstein, and an email sent by Greensill founder Lex Greensill in December 2019 suggesting the SoftBank boss had given it his blessing.

Credit Suisse has had to request permission from a UK judge to start legal proceedings against SoftBank as its clients’ money was lent by Greensill, not the bank itself. A decision over whether Credit Suisse can proceed is not expected for several months.

SoftBank’s lawyers have so far dismissed Credit Suisse’s efforts to collect information through the US courts as a “fishing expedition”, believing the bank had little intention of launching proceedings in London and that it is trying to deflect attention from its own poor investment decisions, according to people familiar with their thinking.

A judge in California in June set Credit Suisse a deadline of August 12 to show that it was serious about initiating a UK legal claim.

Credit Suisse and SoftBank declined to comment.

Credit Suisse was forced to close a group of supply-chain finance funds last spring when Greensill collapsed, trapping $10bn it managed on behalf of 1,200 of its wealthiest clients. It is still trying to recoup more than $2.5bn and has warned clients that court battles and contested insurance claims could take up to five years.

Last month, the bank told clients that efforts to recover the funds would cost them $291mn.

Additional reporting by Stephen Morris and Kate Beioley in London