“Only internal SoftBank - Lex is slippery and prone to lying so the penalty has to be high. He gives 3% extra stake no matter what the excuse if - auditor is not upgraded by November, regulator approval or not. - all the aircraft from the company/bank balance sheet is sold in the next 4 months. - December quarter end audit is performed by a big 4 audit firm.”
“Lex, I am glad to hear that business is starting to recover. The team has given me an update on the progress you have made in recent months. I am worried about how market volatility can dramatically affect your business. Liquidity can go away fast and, if it does, you will not be able to fund your customers. I know you are still growing the company as you expect a strong fourth quarter. But you need to reduce your operating costs in case volatility returns. The markets will be volatile again and your funding is still fragile. You are a growth guy and so am I, but you need to lean towards discipline after the recent near death experience. There is no need to be so aggressive in the short term until you are sure of liquidity. Give yourself some cushion. Please cut your costs now.”
“Resolution of the matter • SBG will purchase all outstanding notes issued by Katerra at par [$440 mm notional] ٠ Related to the March event, Greensill will provide to SBG in the form of penny warrants$105 million in shares at the valuation of Vision Fund's last investment [date] • Related to the Katerra note purchase, Greensill will provide to SBG in the form of penny warrants$100 mm in shares at the valuation of Vision Fund’s last investment ٠ Greensill will sell the private jets prior to IPO, not by December 2020.” ٠ Greensill will sell the private jets prior to IPO, not by December 2020.”
“• SGB [sic.] will repurchase all outstanding notes issued by Katerra at par -$440m notional. ٠ Related to the March CS support, and as currently almost finalized with the lawyers, SBG will be issued 23,823 class A shares and SVF will be granted 15,708 additional class G shares (the latter to insulate SBVF from dilution). These can temporarily be in the form of a mandatory convertible CLN until BaFin approval to convert to equity is received for those respective grants. The value of the shares will be set equal to the last SVF investment, which is$2,385.10 /share. These are common shares as specified in the constitution. ٠ Related to the Katerra note repurchase, Greensill will issue to SBG$150m worth of class A shares at the last SVF investment price of$2,385.10 /share requiring 62,890 shares allocated to SBG, which, again, can be temporarily in the form of a mandatory convertible CLN. • All new class A and G shares will be from newly issued common shares at the time of conversion. • Greensill will sell the private jets prior to the IPO, not by December 2020.”
“AGREE. AS SBG WILL KNOW FROM THE KATERRA DOCUMENTS, THE VALUE OF KATERRA AT DEFAULT (OF WHICH WE HAVE SECURITY) IS$190 MM.”
“this is our understanding of the proposal as it currently stands”: “• SVF(2) will subscribe$440 mm for a CLN on same fundamental terms as the other CLNs, to be closed as soon as practically possible. • The CLN will convert into a total of 86,713 shares ($206.8m as valued at Oct 2019 round of$2,385.10 per share) comprised of: • 23,823 shares related to the March SBG-CS support, having a notional value of$56.8m • 62,890 shares related to Greensill-SBG CDS first loss and risk assumption on Katerra, worth a notional value of$150m • Note: SVF(1) will receive further shares equivalent to provide antidilution protection on its position for the issuance of the 23,823 shares noted above. • Greensill assumes all risk on the Katerra Notes (current notional$440m ) and will manage their recoveries. All recoveries will be remitted to accounting for the same to SVF(2) • SBG to: o Waive any right to the CS-related award that was contemplated from Greensill to SBG (including the Lex Greensill personal undertakings) • Greensill to waive SBG liability under the CEP for Katerra loss. • Greensill will commit to the disposal/sale of its corporate jets prior to the earlier of: its IPO, or December 31, 2021. Lex Greensill will provide a personal undertaking to induce the company to do this. Failing to do so, Lex will transfer personal shares equivalent to 3% of ownership of Greensill to SVF(2) as penalty. • As we discussed, you have also asked SBG to waive/acknowledge as discharged in full the Softbank CDS first loss by Greensill for the current period (9 Oct 2020 -8 Oct 2021 ). SBG has proposed that this waiver should not be in effect for loss events related to Fair. In the event of a Fair credit loss, SBG proposes there will be no waiver.”
“Katerra recap needs to be agreed within next 24-48 hours” … “If no agreement, Katerra Board of Directors will be compelled to file for bankruptcy”.”
“1. The deal terms per Tom Cheung’s email below are agreed in full, other than with respect to the application of the First Loss for Fair (meaning there is no First Loss participation for Greensill for any losses on our facilities provided to OYO or View at all up to8 October 2021 ). […] 3. In consideration for the above SBG and SBVF2 will ensure the agreements described in Tom Cheung’s note below (and as described in this email) are executed and the funds transferred to Greensill on or before Friday 6 November. (This will ensure we do not have a disclosure issue with our incoming equity and debt investors, and, more importantly with our insurers who are covering the Katerra, Fair, View and OYO transactions.)”
“I have previously been advised that we may receive a large sum of money to reduce SB exposure at CSV as indicated in the new Investment Guidelines. I wanted to check with you if you had any update on this please. It was to be determined what programme we’d reduce the exposure for, but my understanding was this would most likely be Katerra MO programme and SB would purchase the paper in a note format. The technical details were not fully outlined.”
“Indebtedness of Katerra: Upon and as a condition to closing, except as provided in herein, the indebtedness of Katerra and certain of its subsidiaries to Greensill Limited (“Greensill”) under those certain notes, credit agreement, loan documents, all prior agreements and any amendments, modifications, restatements, waivers, extensions, or other agreements related thereto pertaining to the indebtedness, equating approximately four-hundred and forty million dollars ($440,000,000 ) (the “Greensill Indebtedness”), shall be fully paid, performed and discharged in consideration for no more than one hundred seventy-six million dollars ($176,000,000 ). In connection therewith, each of Katerra and Greensill (on behalf of itself and its subsidiaries) shall, in each case, release and forever discharge each of Greensill and its affiliates, and its and their respective shareholders, officers, managers, directors, employees, partners and associates, the Investor Releasees, the SVF Releasees and the Katerra Releasees, as applicable, in all domestic and foreign legal jurisdictions from any and all liabilities, claims and demands, actions and causes of action, damages, costs, payments and expenses of every kind, nature or description arising from the Greensill Indebtedness and the Transactions (subject to exceptions to be agreed). Such releases to be entered into in a separate binding agreement by and between the applicable parties thereto.”
“SVF are to contribute$200m of a$380m round, with ~$176m in proceeds funding an anticipated negotiated paydown of the$440m Greensill facility [sc. the RPA] (upon which the facility shall be considered fully paid/discharged). Other debt obligations are to be similarly restructured.”
“In H2 2019, Greensill provided a$440M credit facility to Katerra. In recent weeks, Katerra has come under financial distress and has indicated that it may not be able to satisfy its repayment obligations under the credit facility, potentially resulting in a default. In order to avoid potential negative impact on Greensill's financials or franchise, Greensill anticipates using the proceeds of SVF 2's$440M investment to purchase notes that were issued to fund the Katerra facility [sc. the RPA] from external investors and manage this risk internally. In exchange, Greensill is offering an additional 62,890 shares to SVF 2 (notional value of ~$150M at the October 2019 round share price), as well as the right to receive any recoveries Greensill is able to generate on the$440M Katerra facility (through repayments and / or liquidation of collateral).” […] “There is urgency to minimize potential negative impact from the Katerra facility [sc. the RPA], as Greensill is currently in the market running an equity and debt fundraising process. Greensill has hired Credit Suisse and Citibank to arrange a pre-IPO funding round, in which Greensill is targeting a -$1 Bn capital raise consisting of a -$600M pre-IPO equity private placement and a -$400M private debt placement.”
“Katerra Proceeds. Greensill may remit any cash proceeds from recoveries on the existing$440M Katerra credit facility to SVF 2. Greensill may accept repayment in an amount less than$440M and extinguish the remaining principal amount, at the direction of SBIA.”
“It is anticipated that proceeds will be used to purchase the Katerra notes from external investors and manage the risk internally.”
“On the transfer of the Katerra Notes to SVF, Greensill does not agree this position and is comfortable with the drafting suggested by SVF in the Katerra Agreement. SVF is putting Greensill in funds to the amount of$440m and Greensill will be able to use this to fund the buy back of the CS notes. That is why Greensill has the obligation to remit any funds recovered.”
“Greensill can reasonably agree to remit any recovered amounts within 21 days. We require this time because unwinding defaulted or cancelling existing notes requires unique actions by Clearstream, the Note Issuer SPV and by Citibank in its capacity as Security Trustee and Issuer - this will certainly take more than 3 days. Given the severe consequences of a breach (i.e. the first loss protection falls away) we need to build in a longer period of time. The loss of this protection would be cataclysmic for Greensill. Any recoveries will rest in the segregated Katerra Collection Account - which is the way the Greensill process works.”
“(C) On or around the date of this Deed, a subsidiary of the Vision Fund II, SVF II Wyatt Subco (Singapore) Pte. Ltd., subscribed for US$440,000,000 in return for the issue of convertible loan notes which on conversion convert into 86,713 shares in Greensill (SVF II Loan Note). As part of the consideration provided by Greensill in respect of the SVF II Loan Note, Greensill will assume any and all losses in respect of the Katerra Notes and the Katerra Programme (each as defined below); and (D) In connection with Greensill assuming any and all losses in respect of the Katerra Notes and the Katerra Programme, SoftBank agreed to conditionally waive CDS Greensill First Loss 2020 – 2021 (as defined below) on the terms set out in this Deed and Lex Greensill agreed to enter into a sale and purchase deed with SoftBank on or around the date of this Deed (SPA) with respect to the sale and purchase of certain shares in Greensill.”
“The Releasors shall acknowledge that [GCPL] has and shall bear sole liability and responsibility for any and all actual or threatened losses, costs or damages (howsoever arising) incurred by Greensill or any of its Related Parties (including, for the avoidance of any doubt but without limitation, Lex Greensill) arising out of, in connection with or relating in any way to the Katerra Programme, the Katerra Notes or any of the Released Claims.”
“The Parties agree: (a) to keep this Deed, the existence of this Deed and the transactions contemplated by this Deed confidential”
“In consideration for the First Loss Waiver granted by SBG and the entry into of the SVF II CLN by SVF II Subco, SBIA in its capacity as manager of SVF covenants to each of SBG and SVF II that it shall use its best efforts to procure that (i) Katerra Inc repays at least$176,000,000 in respect of the Katerra Facility to Greensill [defined as GCPL]; and (ii) [GCPL] or a member of the Greensill Group remits the entirety of the amounts recovered in immediately available funds to, or at the direction of, SVF II prior to31 December 2020 .”
“$250m was paid to GB to hold against collateral against re GFG positions. The balance was used in a combination of (i) transient "asset purchase liquidity" e.g.$70m was used on 25 Nov 20 to purchase assets on GCUK's B/S until 16 Dec 20 when the money was returned via sales and maturities of the assets, and (ii) "operational liquidity" for GCUK to fund monthly opex$35 million pcm) until administration on 12 Mar 21.”
“Two days ago the new investor consortium walked away from the contemplated transaction (as a reminder they had committed a$180M investment alongside SVF1’s$200M that was approved by IC on Nov. 5th). … The new deal structure we are contemplating is largely identical to the original deal, except with SVF2 investing$180M instead of the new investor consortium, alongside SVF1’s$200M .”
“Saleh, are we approved to engage with Katerra re a 100% write off? Their legal team is chasing us?”
“No. Not yet. Let me revert please.”
“Amend original CLN Only amendment is to add more warrants (from the 180m new deal). No other change. That gets executed between V2 and G. K&G enter into a separate debt settlement deed which effectively settles G 's claim over K @ 40c in full and final settlement of the$440m . K and V1 and K and V2 enter into two separate shareholder agreements / subscription agreements for 200m and 180m respective and for 51% and 34% ownership respectively. V1 and V2 Fund K and K gives 176 to G and G gives 176 to V2. At G’s end, they take the 440 originally given to them by V2 to buy out the note from CS fund at par. All of the above will occur contemporaneously.”
“· CLN Amendment. Greensill agrees to amend existing US$440M convertible loan note (CLN) with SVF II to increase the number of shares into which the CLN is convertible into. The amended CLN will be convertible into an aggregate of [141.218] F class shares. · Cancellation of Obligation to Repay$176m SVF II agrees to cancel Greensill's obligation to repay US$176M of any proceeds acquired from the Katerra facility [i.e. the RPA]. · Cancellation of Katerra Facility Greensill agrees to forgive and terminate existing US$440M existing loan facility with Katerra. · Issuance and Transfer of Katerra Warrants. Katerra agrees to issue to Greensill, warrants exercisable for a number of shares equal to 5% of the fully-diluted ownership in Katerra and Greensill agrees to transfer such warrants to SVF II.”
“All of that fits with our previous understanding of the deal, save the last Katerra equity issuance which we only leaned about on yesterday’s call. I don’t think we have any objection in principle of this pass through of the 5%, but clearly we need to get our external counsel engaged to understand fraudulent conveyance risk and also our finance/tax team to assess for accounting/tax hair.”
“Krishna – we have learned from counsel that the FTC is backed up on HSR filings, and even with early termination requested (typically clears in ~15 days), it will likely require the full 30-day waiting period before we have clearance to fund/close (i.e. end of year). Given that, wanted to get your input on the bridge sizing need; please let us know your thoughts. …”
“Thanks for the update, Krishna. I'm surprised to hear that the collateral issue is news as I believe Jeffrey Housenbold mentioned several times on recent calls that a bridge loan provided by SB would need to be backed by company assets; unfortunately we are unable to fund this on an unsecured basis”. “I have raised the CLT factory lien issue to senior leadership at SB, who have committed to discuss directly with Lex once we have secured IC approval for the larger transaction (hopefully in the next day or so). Will keep you all posted as soon as that happens, but what would be helpful in the interim (we have asked Weil to work with K&E on this), is to get a precise list of steps, documents, approvals, etc. that will be required for Greensill to release its lien on the CLT factory in a timely manner. It would be great if we can serve this up to Lex & his team to streamline as efficiently as possible.”
“1. Work with Greensill to get the CLT lien released. This has to happen very quickly to provide you with the collateral you need. 2. Fund the first bridge. 3. Get IC approval for the deal. 4. Immediately file for HSR clearance (to start the 30 day clock) 5. Fund the second bridge; get clearance from Wolff on the releases etc 6. Close and fund once HSR approval is received.”
“Immediate • Greensill waives covenant for Katerra to pledge • SVF accepts 2nd lien on CLT factory and funds bridge loan on Monday Medium Term (TBD) • Greensill to release security interest of CLT collateral • SVF / Katerra to perfect CLT collateral 2-3 weeks • Greensill will cancel the$440M facility • Katerra will issue warrant of 5% FDSO to Greensill • Greensill will then give the warrants to SVF 2.”
“As you are aware, we are sprinting on the Katerra side of things to get funding into Katerra by way of a secured note. The main asset that we would like to secure against is Katerra's CLT facility, which has been pledged by Katerra to Greensill in connection with the Greensill-Katerra facility. On today's call, the principals confirmed that Greensill would be ready to assist and release its security interest on the CLT facility in connection with SVF's funding into Katerra. To that end, we plan on communicating the same to Katerra's counsel (K&E) who would then reach out to Greensill to start coordinating. The goal is for us to fund on Monday which is aggressive but being driven by Katerra's current cash position. Please let us know if you have any concerns with this approach or if there are particular individuals in addition to yourselves that we should have K&E include on the outreach.”
“We have agreed to maintain the facility at its current outstandings of USD440mm. We have agreed with Softbank a solution whereby Greensill has the ability to exit from this position without loss. Until that restructuring is effected, we will continue to fund the company up to this amount as receivables come due once a month. Katerra has sufficient liquidity to maintain operations into 2021.”
“Amended and Restated Omnibus Deed • Removal of reference to the value of Vision Fund II CLN. We do not wish to attribute a benefit to the grant of additional shares to any one single event. This would require Greensill to have to value such event which could have P&L consequences. • Deletion of Greensill's obligation to repay USD 176m and the inclusion of general language to make recoveries for amounts received pursuant to the Katerra programme to the extent any are received.”
“To include contemporaneous investment by SVF Abode (Cayman) Limited (“SVF”) of$175 million in cash and the extinguishment of$25 million of indebtedness of Katerra Inc. (‘Katerra’) owed to SVF under the Promissory Note, dated December 1, 2020, issued by Katerra to SVF in exchange for a new class of preferred shares, the conversion of all preferred shares outstanding as of the date hereof into common shares, the extinguishment of$440 million principal amount of indebtedness of Katerra and certain of its subsidiaries owed to Greensill Limited in exchange for preferred shares being issued to Greensill Limited that are the same as those being issued to SVF and equal to [5% of the fully-diluted equity], and an aggregate of 5% of the fully-diluted equity will be made available to certain existing investors in Katerra…who will provide a release and enter into customary shareholder arrangements, with the specific security, shareholder arrangements, identity and eligibility of the Existing Investors to be agreed among Katerra, SVF, Wolff Principal Holdings, LP and controlled affiliates (“Wolff”).”
“Katerra received HSR clearance, and so we should be set to close as early as this Thursday (but more likely early next week). Would you let us know if you have any comments or concerns on the attached document? And otherwise, could we discuss logistics on Greensill’s execution and delivery of the attached - ideally, we would get your signature page in the next day and hold it in escrow, subject to automatic release on the closing with SoftBank.”
“To the extent a Greensill Group Company, after10 November 2020 : (i) recovers any amounts to which it or any other Greensill Group Company is entitled under the Katerra Programme from any other party other than SoftBank Vision Fund LP, Vision Fund II or SoftBank; or (ii) receives as consideration any equity interest or instruments convertible into an equity interest in Katerra Inc., Greensill and Greensill UK shall procure that such Greensill Group Company promptly remits any such amounts, equity interest or instruments convertible into an equity interest to Vision Fund II.”
“First Contribution and Consideration. Greensill hereby contributes, transfers, assigns and delivers to the capital of [Katerra Cayman], and [Katerra Cayman] hereby accepts, assumes and receives from Greensill, the Greensill Indebtedness. In exchange for the Contribution, [Katerra Cayman] hereby agrees to provide the Consideration.”
“Second Contribution. Immediately upon completion of the First Contribution, [Katerra Cayman] shall contribute, transfer, assign and deliver to the capital of Katerra Delaware, and Katerra Delaware hereby accepts, assumes and receives from [Katerra Cayman], the Greensill Indebtedness.”
“(a) the aggregate amount of the Facility Obligations (as defined in the Receivables Purchase Agreement) and all other monetary obligations under the Greensill Finance Documents shall be deemed indefeasibly paid and discharged in full; (b) all commitments to extend credit to the Company, Katerra Delaware and each Seller under the Greensill Finance Documents shall be automatically terminated; (c) all other obligations of Greensill, the Company, Katerra Delaware, each Seller and its respective subsidiaries and affiliates under the Greensill Finance Documents or any other documents between the parties shall be indefeasibly released, discharged and terminated in full and have no further force or effect; and (d) each of the Greensill Finance Documents and any other documents between the parties shall be automatically cancelled, terminated and of no further force or effect.”
“Security. Upon, and effective as of, the time of receipt by Greensill of the Consideration in the manner described above (such time being referred to as the “Effective Time”) and not withstanding anything in the Greensill Finance Documents to the contrary: (a) Greensill will promptly deliver any possessory Security (as defined below) held by it to the Company (or such other person specified by the Company in writing); and (b) all guarantees, security interests, mortgages, pledges and other liens granted to or held by Greensill as security for the obligations under the Greensill Finance Documents (any and all such guarantees, security interests, mortgages, pledges and other liens granted by the Company, Katerra Delaware, each Seller or any of its or their respective subsidiaries and affiliates in favor of Greensill, collectively, the “Security”) shall be automatically, and without the need for any further action or approval, forever satisfied, released and discharged. …” (a) Greensill will promptly deliver any possessory Security (as defined below) held by it to the Company (or such other person specified by the Company in writing); and (b) all guarantees, security interests, mortgages, pledges and other liens granted to or held by Greensill as security for the obligations under the Greensill Finance Documents (any and all such guarantees, security interests, mortgages, pledges and other liens granted by the Company, Katerra Delaware, each Seller or any of its or their respective subsidiaries and affiliates in favor of Greensill, collectively, the “Security”) shall be automatically, and without the need for any further action or approval, forever satisfied, released and discharged. …”
“Transfer of Shares. Effective immediately upon receipt thereof, Greensill hereby transfers, assigns and delivers to SVF II, and SVF II hereby accepts from Greensill, the Shares (the “Transfer”). Greensill acknowledges that from and after the completion of the Transfer on the Effective Date, Greensill no longer owns any Shares and, with respect to any such Shares that it held prior to the Effective Date, Greensill no longer has any rights whatsoever, as a shareholder of the Company or otherwise”
“Conversion Notice. Pursuant to Section 6.1 of the 2019 Promissory Note and Section 7.1 of the 2020 Promissory Note, Holder [SVF Abode] hereby exercises its conversion right as to each of the Promissory Notes and elects to convert the amount due under the Promissory Notes, equal to a total of$330,515,803.23 (the “Payoff Amount”), in exchange for 101,360,341 shares of the Company’s [Katerra Cayman’s] Series F-2A Preferred Shares, par value$0.0001 per share, to be issued to Holder (the “Conversion”).”
“Subscription. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller hereby issues and sells to, and the Purchaser hereby purchases, 7,775 Class C Ordinary Shares of the Seller, par value$10 (“Class C Ordinary Shares”), for the sum of$77,750 (the “Subscription”).”
“As mentioned earlier today, we spoke to Katerra’s CFO: 1. They do want to sell receivables on the 15th of December. They believe they will have sufficient AR volume to do a full roll and have requested that we shorten the buffer period to 0, so all the receivables become due on the 15th of January a. They added that our facility should be terminated before the 15th of January 2. They explained that in addition to the USD50mm note (for which we released our real estate security this past weekend), Softbank is going to inject USD150mm of equity into Katerra by the end of December a. The timing of this injection is what is driving their willingness to roll receivables until January 3. We asked what’s the status of the pay off and whether Kirkland/Katerra would be sending a revised pay off letter (we didn’t mention any %, and instead asked to see what they said). They didn’t mention any specific % on the call and said they were due to speak to Softbank counsel to gather information later today a. Right now we just got the attached email from the CFO saying that Kirkland/Katerra will not be sending us any pay off letter?? and that the termination will be handled entirely between Greensill and Softbank…. ??? I don’t think this makes sense at all. For a termination to occur, we need both parties of the agreement, lender and borrower to sign the termination letter particularly if it is committed.”
“Katerra is in the process of restructuring and this exercise is likely to be finalized in early 01 2021. For conservative measures, Greensill and the company would prefer that the notes maturing in January and February next year are pushed to March. There are currently 70 notes maturing in January and February for an aggregate maturity amount of USD363mm (see spreadsheet attached). We request approval to extinguish those notes and issue a new set of notes that mature on 15-Mar-2021. In order to do this, Katerra would submit a request to update the buffer period of the related purchased receivables. The outstanding facility amount will remain unchanged. We are in coordination with Trading, Operations and Legal, and the plan is to bring this to completion before 31-December-2020.”
“Ivan - Katerra is asking to amend the buffer. You need to tell CS this is really operational. If we could change existing notes, we would. But we cant. So we need to cancel and reissue. There is no exposure increase other than intraday.”
“on8 December 2020 BaFin had communicated that it required an acceleration of the reduction in exposure to the GFG group in a manner, which in the group's view, was not sustainable. In summary, for every$100 of GFG receivables due to be rolled over BaFin required that only$25 be rolled over (i.e. a 75% reduction in exposure).”
“LG further explained that he had spoken to the head of bank supervision at BaFin on15 December 2020 . [He had explained that the request for further acceleration of the GFG exposure had had to be disclosed to equity investors and the uncertainty meant that TDR, which was planning to provide$350m of equity and to bring along another investor which would provide£150m of debt and$50m of equity, would not proceed with the investment.] … LG said that he had found out the impact of the BaFin discussions on TDR’s investment on 23 December and had immediately contacted Softbank (as a significant current shareholder) to discuss whether it would be prepared to provide a bridge facility … LG explained that he had also had further conversations with TDR. TDR had said that it could consider investing in the group at a lower valuation provided the position with BaFin had been clarified. LG had considered that this was a viable proposition and proposed to have further discussions with TDR and SoftBank on Monday and Tuesday next week.”
“… LG had been informed this morning that Softbank was not prepared to provide a bridge facility. It was, however, prepared to consider making a further equity investment of up to$250m provided it was alongside investments from other parties. In explaining its decision, Softbank had noted that it had provided support on a number of previous occasions. Softbank had also noted that its investment was made solely through the SoftBank Vision Fund and if it was to cross a 50% threshold in terms of equity ownership it would need to consolidate Greensill Bank AG, which was a red line.”
“5.2 The directors noted and carefully considered the following matters and material for the Company: (a) The most recent annual financial report as audited by the Company’s auditors; (b) The most recent half-year financial report; (c) The most recent monthly management accounts; (d) The most recent … month cash-flow report for the Company; (e) The report from management of the Company confirming that (i) there are no outstanding overdue money judgments or letters of demand against the Company, and (ii) there are no material creditors of the Company whose debts are outside of normal trading terms; (f) The Company and its English subsidiary, GCUK, are conducting capital raising in order to further fund the business activities of the Company and its subsidiaries as referred to in an earlier part of the meeting. 5.3 Having had regard to the above matters and material including the verbal update provided by NG as to the Company and the group’s financial position, it was resolved that in the view of the directors the Company is presently solvent, and that for the Company to continue to trade (and incur debts) in accordance with the cash-flow forecast set out above, it will not become insolvent. …. 5.4 The directors further noted that negotiations with government authorities in relation to the conduct of the business of the Company’s German subsidiary, Greensill Bank AG, were ongoing, and that those negotiations were potentially adverse to the trading position of Greensill Bank AG and to the capital raising set out above. 5.5 Having regard to the matters in paragraph 5.4, it was resolved that, while the directors do not presently consider or suspect that the Company is or may become insolvent, out of prudence the directors recognise a risk that it could be reasonably suspected that the Company may become insolvent in the future, if the matters in paragraph 5.4 do not resolve favourably for the Company and its subsidiaries. […] 6.3 It was resolved that, noting the resolution in paragraph 5.5 above, the Company would immediately commence development (and then implementation) of a plan for the restructuring of the Company to improve its financial position (Restructuring Plan). 6.4 The directors noted that proceeding with the capital raising and negotiation with government authorities set out in Section 3 was an initial step in the Restructuring Plan. 6.5 It was resolved that the Company would appoint partners of Grant Thornton in the UK and Australia with expertise in restructuring and turnaround to advise the Company and its directors in relation to the development and implementation of the Restructuring and any required contingency planning. It was also resolved that the Company would confirm the appoint Allen & Overy LLP.”
“LG noted that a seller concentration reduction plan had now been agreed with BaFin. He noted that the plan reflects the plan previously agreed with the German Deposit Protection Fund in October 2020, save for two additional items: to a reduction in exposure from$4600m down to 5300m by30 Sept 2021 , and then a further reduction to nil exposure by31 Dec 2021 . LG also confirmed that it was agreed that an exposure reduction would also be made when the equity raise closes, and noted that in this regard BaFin requested that it be provided with confirmations directly from equity investors relating to the equity funding.”
“LG went on to note that CS had, immediately prior to this meeting, accepted the proposal put forward by LG to relax the implementation of CS’s guidance, save for a couple of points. LG noted that CS had agreed to suspend its new rules until the end of March. In respect of SoftBank portfolio company assets. LG noted that by this time the assets on programs with ceased funding would have amortised down to zero. In relation to GFG assets, CS had not been buying these assets from the Greensill group this week, but CS has agreed to recommence purchasing GFG assets from tomorrow…. He noted, however, that CS’s conditions were as follows: by the end of January a reduction of$100m in GFG assets was required from the level today, which equates to an aggregate reduction of$200m for January. The GFG seller concentration limit would be required to be reduced to 9% by end of March…. By30 June 2021 , the GFG seller concentration limit would be required to be reduced to 5%. Additionally, when the Company’s equity raised closes, the Company would be required to buy back$150m of SoftBank portfolio company assets. Finally, the Company would be required to grant CS a 12 month option to buy$150m shares in the Company at the same valuation as applies for the equity raise. LG expressed his view that it is unlikely that the Company would achieve a better deal with CS and that the Company should therefore accept CS’s proposal. LG added that CS were due to speak to Finma tomorrow and therefore any objections should be raised now.”
“4.9 LG went on to provide an update on discussions with TDR. He noted that, while TDR expressed a positive view of the Company's business model, they were not comfortable with the level of exposure to the SoftBank Vision Fund (SVF) and GFG not from a credit perspective, but due to liquidity risks arising from these concentrations. TDR were concerned that there could be a run on the CS funds or the possibility that BaFin may change its position and potentially impose new or different requirements that would cause an unanticipated liquidity shock. As a result, TDR viewed the risk of investment as too high for the amount that was requested to be invested. TDR confirmed that, if they were to invest, they would require some form of liquidity protection for the group covering these two exposures. LG noted that this would need to be a significant facility, and that, while numbers weren’t discussed. his estimate was around$2bn . Given the required size, LG noted that his view was that only SVF would have the funds to provide such a liquidity facility. […] 4.10 LG went on to note that, following the discussions with TDR, he has had two conversations with Rajeev Misra (RM) of SVF, who indicated that the Company should prepare a proposal which quantifies the size of the liquidity facility and related exposures so that SVF could evaluate the proposal. LG noted that one beneficial element of this proposal was that the facility would be provided contemporaneously with the equity raise, resulting in a lower probability of a substantial call on the facility being made. LG observed that, even though the prospect of a credit facility from SVF would mean TDR would potentially be more interested in investing, if that liquidity facility is in place then there would be less of a need to raise the quantum of equity previously sought. A smaller equity round would therefore be possible. LG noted that CS (in its capacity as advisors in respect of the equity raise) are confident in interest from additional investors for a quantum of between$250m -$300m at the value the Company had originally been targeting. LG noted that his family holdings would also participate, as would certain other significant non-institutional shareholders, based on recent conversations he has had. 4.11 On this basis, LG noted that the Company could still achieve a$600m equity raise with the support of the liquidity facility, which would cover insured SoftBank and GFG assets. LG was careful to note, however, that this was not an agreed deal, and that AE and NG were putting together a revised sources and uses plan that would take into account the smaller equity raise and the liquidity facility. 4.13. The chairman thanked LG for the update and noted that, based on the information that had been presented to the directors, it appeared there was still a reasonable prospect that the Company could avoid an insolvent administration or liquidation, but that it was also a realistic concern that the Company may not.”
“I spoke to Lex, he said he spoke with you regarding the feedback from TDR. He said you signalled you were amenable to considering us (SVF2) providing a solution here. Tom Daula and I also spoke (and I briefed Colin). Our understanding is the following: • TDR has expressed interest in continuing to invest in size ($1 -1.5bb) if “liquidity risk of exogenous shock” on the SVF portco and GFG exposures is boxed (valuation still TBD) • In comparison to the December proposal which was turned down, two significant conditions seem to have changed o BaFin has provided more concrete guidance with regard to the risk selldown plan and is acting more rationally o TDR may provide a large equity check (~$1.5 bb) sitting under our new proposed liquidity facility • A feasible solution to consider is SVF2 provides a ‘liquidity facility’ which could warehouse GFG or SVF risk if an exogenous shock occurred (e.g. Greensill misses its selldown plan agreed with BaFin) … ”
“Don’t use$440m raised in CLN (from Tom Daula’s team) to buy Katerra Note back. Asked Greensill whether it is acceptable, said “Katerra Note The deadline is March 2021 (S400m) No need to buy back.””
“Masa [Son] and Rajeev [Misra] concluded that SBG/SVF2 should NOT do anything related to this issue on the call which you were on a few days back. If you would like to save Greensill or give time to Greensill, SVF 1 should purchase those notes from CS. We heard from Rajeev that Greensill is in a serious liquidity situation which would be unlikely to be resolved. Therefore, SBG/SVF2 should not take any incremental risk. Greensill has asked for too much to SBG. They have to negotiate with CS, not SBG/SVF2.”
“We have just been informed that the chairman, head of BoD risk committee and head of BoD audit committee have resigned. That is not public and we do not know the reasons yet, but it is an alarming development to say the least. Given your stance and the above development, we have paused on this transaction.”
“Credit Suisse have just sketched out a plan that they plan to take to their board for in-principle support tomorrow. It is a complete solution that sees them provide a committed underwrite of the entire GFG book for us.”
“Saleh just informed me that the SoftBank Vision Fund 2 Investment Committee today declined the proposed co-purchase of$300 mm of insured GFG paper (where CS was looking to take$150 mm and SBVF2 a further$150 mm). (CS was also planning to purchase a further$150 mm of Vodafone SCF paper from us as well.) You won't be surprised that both Credit Suisse and I are very disappointed by that decision as it undermines the necessary partnership approach which CS needs to see in order to support the planned refinancing of the GFG paper.”
“We had a call with CS re legal DD and the way forward, at the end Luc enquired about the SB limits and the urgency to reduce them”
“I will call you to discuss”
“I spoke to Lukas just now as part of my update call and informed him that we are actioning all the points he addressed and that you will communicate with L & M […] His understanding is that we will move [redacted]/Katerra out tomorrow but I said that we have not been made aware (I know we won’t move it out until March).”
“When we have funds, we need to buy back each note and settle CS. Where is the 370m coming from? 50 [redacted] + 10 [redacted] reduces to 310.”
“Given it looks like no further secondary trades are planned is my understanding correct that there will be no action on Katerra MO (Fairymead), View and GFG companies? If this is the case please note that the funds will be in breach with the agreement signed earlier this year.”
“Hi Zara, team, As discussed please find attached a secondary request to move all [redacted] Fairymead assets from CS Virtuoso on the 31/12/20 to GCUK via GB settling the 15/01/21. Zara agree that we have 45 [redacted] ISINs and 83 Fairymead ISIN's to repurchase.”
“Not new for you... means you swap in to eq after the buy back I assume...?”
“Good Morning Lex, This will not work.....this looks like an non payment / default. We sold this program back to GS with settlement 14.1… We should say that the program will be either paid back or undo for the fund next two weeks”
“Up to December 31, we have executed additional sell orders in notes related to Vision Fund companies in order to bring the remaining exposure in line with the agreed internal investment guidelines. All notes from View as well as the notes from Katerra multi-obligor program maturing in March and May 2021 were sold back to Greensill. As required by Greensill, the settlement date of the Katerra notes is January 14th. After transfer of the Katerra notes, the program will be cancelled by Greensill. The fund did not have credit exposure to Katerra. As a multi obligor receivables program the credit risk is on multiple customers of Katerra. In any event, the program is 100% insured. There will be no performance impact. A detailed update of all exposures - which shall be in line with the new internal guidelines - will be provided in couple of days.”
“Katerra has been restructured, however the fund does not have credit exposure to Katerra. As a multi-obligor receivables programme the credit risk is on multiple customers of Katerra. These notes all run off within the next 90 days and the programme is 100% insured. There will be no performance impact on the SCF Fund”
“As you are aware, of the dozens of customers in the SCF Funds, we have been able to bring all but two into line with the concentration limits agreed in Summer 2020. Clearly COVID, which has not panned out as we all reasonably anticipated back in the summer, has had a material impact on our ability to either refinance or distribute some of our programmes’ notes to other investors. As you are no doubt aware, we are presently concluding a significant strategic equity raise, in excess of USD$1.5bn , which we and our advisors, Credit Suisse and Citi, intended to close before 31 December. We had planned to use some of these proceeds on a short-term basis to buy back assets in excess of the concentration limits from the SCF Funds pending onward sale to other investors or held to maturity. Given the Christmas period, the close has run into January but, on Friday night, the lead investor received in-principle Investment Committee approval to proceed - which is obviously extremely good news. However, there are two conditions on that approval which impacts the Supply Chain Finance Funds and we would be grateful if Credit Suisse would urgently consider same, such that we can promptly proceed to close. SoftBank Vision Fund Companies • Outline ○ The concentration as at 31 December exceeded the year-end target – although we have repurchased more than$300 mm in the past 30 days; ○ This target will be met simply through the amortisation of the View Glass ($276 mm outstanding) and Katerra ($440 mm) programmes over the next 90 days: ▪ View has gone public via a SPAC and all notes will be repaid in March. The SPAC triggers the change of control clause on our programme and the notes will be repaid from the proceeds at closing in March 2021. In the interim, the position remains 100% insured; and ▪ Katerra has been restructured, however the fund does not have credit exposure to Katerra. As a multi-obligor receivables programme the credit risk is on multiple customers of Katerra. These notes all run off within the next 90 days and the programme is 100% insured. There will be no performance impact on the SCF Fund. • Requirement ○ Equity raise cannot close if Greensill is seen as being in “breach” of any SCF Fund rules. • Proposal ○ No further purchases of SCF assets from Vision Fund companies until the concentration target is met (which will therefore be achieved within 90 days); and ○ All Katerra notes will be repurchased by us early upon closing of the Greensill equity raise, which is expected to complete in January 2021; GFG • Outline o The concentration as at 31 December exceeded the year-end target; o All assets are 100% insured; • Requirement o Equity raise cannot close if Greensill is seen as being in "breach" of any SCF Fund rules; o A reduction plan for GFG needs to be agreed with the BaFin re Greensill Bank AG. Over the weekend, the BaFin has agreed to lock in a reduction plan with us on a conference call scheduled for tomorrow (Tuesday) afternoon. The BaFin will not agree to a plan that sees the SCF Funds "prioritised" in their GFG reduction vs. Greensill Bank. To that end, we propose to "match" the proportionate reductions of the SCF Funds with those reductions agreed with the BaFin. • Proposal o In line with our BaFin plan, we would therefore also propose the following modified amortisations (which would bring the fund into line with the concentration target by30 June 2021 ): ■$200 mm - January 2021 - at closing of the Greensill equity raise; ■$100 mm -31 March 2021 ; and ■$150 mm -30 June 2021 . o We are very confident that the March and June reductions can be achieved, given the multiple options are that being actively progressed: ■ Within the EU, GFG is eligible for more than EUR700mm in government guaranteed COVID loans and Greensill is presently executing these and they will all close in Hl 2021; ■ The GFG notes (and their embedded insurance) are being rated. Once the ratings are completed in February we will be able to sell same to our regular fixed income investors (who today only buy rated notes or from rated counterparties and do not benefit from insurance) and tender some of the securities to the ECB under the Pandemic Emergency Purchase Program (PEPP); ■ Convert several of our existing multi-obligor receivable programmes into traditional securitisations, which we will sell to the 51 banks who today buy such securities from us; and ■ GFG have initiated the IPO of their highly profitable, 100% owned, Australian subsidiary, LibertyOneSteel, which should achieve an EV in excess of USD$2bn and generate material liquidity for the group. We are very aware that these two proposals are counter to the agreement struck in the summer of 2020 – but trust you will understand that the world is not today what we all reasonably expected it to be then. What we have tabled is the best we can do and, if these two proposals are approved by Credit Suisse, then we will provide a board minute from Greensill Capital confirming formalisation of same. Given the time sensitivity of this, your speedy response would be sincerely appreciated so that we can finalise our discussions with BaFin and the closing of our milestone equity round.”
“Lex I really believe the right way to approach this for both of us is to complete the trades that have been confirmed. This will keep us both on-side with our Board, Finma (as we have committed to both as you know) and the market overall. I believe the Lex Greensill, and the Greensill corporate, relationship, is important to CS and a proper commercial request through Helman should be put forward. I have spoken to Lara and Helman and expected this direction and a call tomorrow with Thomas Gottstein to discuss... Again, I do not believe breaking confirmed trades is the right direction.”
“I agree with your perspective that this is a broader relationship matter — and have brought the ask to the attention of Helman. Hopefully your fellow members of the group management board will be able to consider our proposal promptly. Separately, we have checked and there are no matched and confirmed trades in the clearing systems between Credit Suisse and Greensill that are unsettled as of this evening. Therefore, thankfully, there are no trades that would need to be broken if your group management board were to approve what is outlined in my email below. We hugely value the partnership that has been forged between CSAM and Greensill — and post this capital raise, see us collectively creating still more value with our joint market-leading franchise — delivering financing to the world's supply chains.”
“I think there are following options... “ A) He gets liquidity from CS or SB / or combination - incl. himself - trades settle - 11.1 and 14.1 - he repays asap after capital increase”
“I spoke to Lex. He maintains that the trades with us bringing us down from 15% to 5% were put in the market by us but now accepted by his team. He claims he has confirmed this with his legal counsel. I told him I have heard differently. He realizes that this puts us in a difficult position but he needs/wants support. I told him we are all very bruised and his request should not be a pullback from commitments to CSAM but rather should be a new transaction. He continue to push for 3 more months... Question — what percentage was vision fund paper when we made the commitment — in other words, how much have we reduced if these trade don’t close and we have 15%? Also — I think in 3 months these trades naturally roll off anyway and we will be at 5%? Are we currently in line (at 15%) with what we have told our investors in terms of guild lines? Lex doing this really puts us in a difficult position... I plan to talk to Thomas [Gottstein] tonight and see what he thinks.”
“Helman — I just spoke again to Lex. Does it make sense for you, Thomas, Lara and I to discuss? I cannot unilaterally agree anything/or break commitments without Thomas’s agreement (and I do believe we have confirmed trades with Lex) — further — even if Thomas is ok, I believe there will be some negative FINMA and Board Blowback to be considered against sizable commercial considerations of losing Lex as an important client. As you and I both know — sometimes when there is a crisis there is an opportunity... Lex wants our view by tomorrow sometime. I am headed to Ny now from Paris. Can you set up a call to discuss? Always something!”
“Sure.. just because they did not instruct the trades.. does not mean we did not agree…we have various mails … Assume he does not pay.. we are still long and it will take time to mature the trades….. we are not in a better situation.. as we have to tell FINMA anyway that we need some more time…”
“As we have already traded the securities on 31.12., they are not in Aladdin anymore. What we do not is taking fund accounting data and get the maturities out. However, installment payments will therefore not be included. These trades have to go through, we have talked to clients about the new guidelines as per end of the year, especially the biggest client in the fund. I do not see how to explain to client in a credible way. Lex always told us that all trades done per end of the year.”
“The following has been discussed and agreed with our CEO and EXB and needs your confirmation latest by tomorrow 10am CET - before we inform FIN MA about the extension of the new guideline validation until March 31, 2021. Vision Fund related transactions […] - Katerra (Multi obligor program of 438mn) — Notes mature on March 15, 31 2021 or latest be bought back by GS by March 31, 2021 (settlement day) - maturities before March 31, 2021 will not be rolled over - VF related notes needs to be below <= 5% as of March 31, 2021— per each SCF fund”
“Key discussion points LW and EV proactively informed FINMA about the concentration risk situation in relation to the SoftBank Vision Fund sponsored papers. The concentration risk of CS was reduced to 16% by year end, but the internal target of 5% set by the Group CEO was not met. It was noted that no regulatory breach was associated with this internal guideline breach. The internal target of 5% was also not communicated to the public. Very late in the process, Greensill flagged that they need additional time to complete the intended transaction which led to the internal target breach. This was a surprise to CS and FINMA was provided with the explanation given to CS by Greensill. CS clearly expressed their disappointment to Greensill and put severe pressure on them to complete the transaction, which will be documented. The Bank’s following action plan was discussed between T. Gottstein, H. Sitohang, L. Warner and E. Varvel. In case Greensill is unable to complete the transaction, AM has put a plan in place that can be executed unilaterally and without any market disruptions. Greensill has been informed that CS will not re-new their programs (assuming Greensill does not do anything) and will run down the respective funds. The notes of two investors will not be renewed in March (i.e. run off) and the investors will be informed by CS. Hence, the run-off exposure is targeted to be 7 % by mid-March and AM has been asked to run down another 2 % in the next three months. CS noted that the preferred option is that Greensill solves the issue and at current, CS does not have any reasons to believe that Greensill won’t live up to their commitments. However, as Greensill did not perform, the two-pronged approach has been agreed.”
“SVF are to contribute$200m of a$380m round, with ~$176m in proceeds funding an anticipated negotiated paydown of the$440m Greensill facility (upon which the facility shall be considered fully paid/discharged). Other debt obligations are to be similarly restructured.”
“By purchasing the Katerra Notes from the CS Fund, Greensill will be able to internally manage (a) all risks relating to the Katerra Facility including repayment and default risks and (b) recoveries from the Katerra Facility. All recoveries will be remitted to SVF2.”
“Use$440m to re-purchase notes (at par) currently held by external investors with exposure to Katerra facility (Greensill will take on full risk)”
“Not new for you... means you swap in to eq after the buy back I assume...?”
“Correct, Michel. Warmest regards, Lex”
“requires a comparison to be made between the value obtained by the company for the transaction and the value of consideration provided by the company. Both values must be measurable in money or money’s worth and both must be considered from the company’s point of view.”
“14. The decision of the House of Lords [in Phillips HL] establishes that, in appropriate circumstances, regard may be had to subsequent events, but it was in the context of attributing value to a covenant which was, on the facts known at the date of the transaction, precarious. I would agree with the comments of Professor Goode in Principles of Corporate Insolvency Law (3rd ed.) at para 11-31: “Lord Scott's speech has generated much debate on the use of hindsight to determine a value at the time of the transaction. But it seems clear that Lord Scott was not in truth applying a hindsight test; rather he was relying on evidence of subsequent events to show that from the outset the covenant under the sub-lease was so precarious and its value so speculative that even at the time it was entered into a bank or finance house with knowledge of the surrounding circumstances would not have attributed any value to the sub-lease covenant.” “Lord Scott's speech has generated much debate on the use of hindsight to determine a value at the time of the transaction. But it seems clear that Lord Scott was not in truth applying a hindsight test; rather he was relying on evidence of subsequent events to show that from the outset the covenant under the sub-lease was so precarious and its value so speculative that even at the time it was entered into a bank or finance house with knowledge of the surrounding circumstances would not have attributed any value to the sub-lease covenant.”
“15. Arden LJ made this very point in the Hashmi case when she said (at para 23) that “there is no epithet in the section and thus no warrant for reading one in”
“[GCUK] hereby agrees to indemnify [GL] against any cost, loss, liability, or expense incurred by [GL] in connection with any claim made against [GL] (i) in its role as grantor of a Participation, (ii) under or in connection with the Transaction Documents or (ii) [sic] otherwise in connection with Clause 8.3 (Cooperation). For the avoidance of doubt, [GCUK]’s obligations under this Clause 7 shall continue to apply notwithstanding the transfer, assignment and/or novation of any corresponding Participation (or portion thereof) by [GCUK] to any third party.”
“Q. Well I completely understand that as of November you say that you were trying to do that. But by December, you obviously are in communication, as we have seen, with Credit Suisse over the concerns about reducing their exposure and so on. And so, at that point, you don’t tell them what’s happening, you just carry on? A. Yes. Q. And you know, therefore, the purpose of the agreement [the CEA] is to put those assets – as you say, to put the receivables and the security to be discharged so it means that it’s out of the reach of Credit Suisse, but you still don’t tell them? A. That’s right, I don’t. That has been my evidence all along.”