Credit Suisse Reduces Activities With SoftBank and Founder Masayoshi Son


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Group Corp. chief executive Masayoshi Son recently dissolved a long-standing personal loan relationship and the bank ended 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 plunged Credit Suisse into turmoil. It also follows Credit Suisse’s $ 5.5 billion loss from family office transactions Archegos Capital Management. The bank has since vowed to reduce the risk.

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

Mr Son still maintains substantial equity pledges with a handful of other banks, the documents show. It was not possible to know who initiated the end of the pledges of shares with Credit Suisse.

A spokesperson for SoftBank declined to comment.

Credit Suisse has also decided to cut 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 layers of risk audits and approvals, which amounts 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 transactions and loans for Wall Street banks. His holdings span the tech world, from running to Uber Technologies Inc.,

drug developers and chip designers. He’s also seen some major stumbles, most notably office owner WeWork.

Credit Suisse has worked as a financial advisor to SoftBank and companies supported by its $ 100 billion Vision Fund. It competes with other banks to list these companies or raise other financing, according to regulatory documents and transaction announcements.

In many ways, SoftBank and Mr. Son are the exact kind of clients Credit Suisse targets. The bank aims to turn personal loans to wealthy entrepreneurs into larger and more lucrative transactions from their equity holdings.

Relations have grown strained in recent months because of Greensill’s collapse, according to people familiar with the matter. Bloomberg News reported in May that Credit Suisse would not be doing any new business with SoftBank.

Problems emerged in the summer of 2020 when Credit Suisse executives examined potential conflicts of interest around the $ 10 billion in investment funds the bank managed with Greensill.

Archegos and how he turned the markets upside down

An investment by SoftBank in one of Credit Suisse’s funds essentially made the Japanese company both a lender and a borrower, as other companies it invested in also received funding. SoftBank redeemed its investment after the review and Credit Suisse said it was committed to protecting investors.

Credit Suisse froze Greensill funds in March when the finance company lost a key type of credit insurance backing the funds. The freeze plunged Greensill into bankruptcy and left Credit Suisse struggling to collect money on behalf of fund investors, including pension funds and corporate treasurers.

Credit Suisse said it was working to recover the money and has so far recovered more than half of the $ 10 billion in capital from investors.

Part of that takeover focuses 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 canceled the loan, the Wall Street Journal previously reported. SoftBank, in turn, invested $ 440 million in Greensill, expecting the money to flow to investors in Credit Suisse funds.

SoftBank’s long-standing strategy of dumping mountains of money on promising start-ups to create big winners has failed dramatically at WeWork and invites scrutiny of the fund’s other investments. Here is an overview of the structure of Vision Fund and how its rapid investment strategy could make it risky. (Video of 12/11/19)

Instead, Greensill placed the proceeds of SoftBank’s investment in a bank it owned in Bremen, Germany, according to a report by a bankruptcy administrator. The report says Greensill used the money he received from SoftBank, including the $ 440 million, to strengthen his 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. Forbes currently ranks him neck and neck with Tadashi Yanai, founder of Asia’s leading clothing retailer, Fast Retailing Co., for the title of the richest man in Japan, with a net worth of around $ 35 billion. dollars.

The brash Mr. Son has always been a big risk taker, say people who have known him for years. He aggressively invests in various companies and often uses his stocks to secure loans, one of the people said. Over the years, Mr. Son has purchased a number of expensive homes in Tokyo, including one he outfitted with an indoor golf course that can simulate weather conditions such as rain.

In 2012, he paid $ 117 million for a mansion near the home of billionaire Larry Ellison in Woodside, California. .

Mr. Son and related vehicles reduced the total number of pledged SoftBank shares from 271 million to 197 million between February and May, according to the documents. Its other equity-based lenders include Nomura Holdings Inc.,

UBS Group AG and Mizuho Financial Group Inc.,

according to the records.

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

Shares of the Japanese tech conglomerate have since tripled, and Mr. Son is now pledging just under 40% of his total holdings in SoftBank as collateral, according to the documents, suggesting that any squeeze on his assets has been lifted.

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

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