FL-2022-000014 - [2025] EWHC 2631 (Ch)

A Credit Suisse presentation dated September 2020 addressed a potential IPO of the Greensill Group. The Greensill Group engaged Credit Suisse’s investment banking department to assist with its fundraising efforts.

Credit Suisse attended a GCPL Board Meeting on 10 November 2020 to give an update on the debt and equity private placements, “(US$400m debt and US$600m equity)”.

By December 2020 the primary prospective investor in the Greensill Group’s equity raise was TDR Capital. A SBIA Investment Update from about 16 December 2020 recorded:

“$600M Equity Raise:

• ~$500M in firm orders received from investors, subject to final diligence check; verbal indications on remaining ~$100M continue to progress

• TDR Capital is lead investor, with $350M order (subject to Lex personally investing $25M in the round)

• Other notable investors include: Regal Funds Management, Mastercard and Fidelity (Australia and US)

$400M Debt Raise:

• Currently in negotiations with Carlyle and Albacore for $400M facility

• Latest key terms under negotiation: senior secured credit facility, 3-4 yr tenor, L+500-600 bps margin / 0.75% LIBOR floor / 97 issue price, 1% penny warrants, implying an all-in cost of ~11.4%

Continue to target first close for both equity and debt transactions before year end; potential for second close in January for equity raise.”

It is perhaps helpful to record here that the SBDs contended that the need to salvage the Greensill Group’s fundraising efforts was the ultimate catalyst for the transactions and arrangements which have given rise to these proceedings. In particular they said that Mr Greensill explained to them that the fundraising was jeopardised by the financial liquidity problems of Katerra and the possibility of further defaults under the RPA. They contended that this led to an agreement to inject $440 million into the Greensill Group and to recapitalise Katerra. They said that the purpose of the $440 million injection was to enable the Greensill Group to redeem or repurchase the Fairymead Notes and thereby internalise to the Greensill Group the risk of a Katerra default. The claimants took issue with this interpretation of events. I shall return to this aspect of the dispute in detail below.

On 13 and 14 October 2020 Tom Cheung and Mr Greensill exchanged proposed terms on the proposed investment into the Greensill Group of $440 million, each of which contemplated the repurchase by SBG of the Fairymead Notes at par. In return the Greensill Group would agree to provide warrants for shares in GCPL.

On 13 October 2020 Mr Cheung sent an email to Mr Greensill summarising the terms discussed between them as follows (parenthesis in the original):

“Resolution of the matter

• SBG will purchase all outstanding notes issued by Katerra at par [$440mm 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 $100mm 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.”

On 14 October 2020 Mr Greensill sent an email saying:

“• 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.”

At this initial stage the proposal was that SBG would purchase the Notes for $440 million. The proposal later evolved, so that ultimately it was agreed that $440 million would be injected into GCPL.

Mr Greensill forwarded the proposal internally on 14 October 2020 at 11.35 am to Jonathan Lane (the group’s senior internal lawyer), Sean Hanafin and Chris Bates. Mr Greensill asked Ms Lindsey Sherrill, Chief of Staff, to arrange a call to discuss the proposal.

Ms Sherrill responded by email saying, “Please see below comments to Tom’s email that outlines what we discussed”. The comments included the following with respect to the point above (“SBG will purchase all outstanding notes issued by Katerra at par”): “AGREE. AS SBG WILL KNOW FROM THE KATERRA DOCUMENTS, THE VALUE OF KATERRA AT DEFAULT (OF WHICH WE HAVE SECURITY) IS $190MM.”

Mr Cheung stated in an internal SBIA email on 27 October 2020 that: “Lex has crafted a CLN structure with embedded Katerra note risk and Greensill equity, so we can purchase as equity instrument (Lex e-mail below, we will work with our legal to validate structure)”.

On 2 November 2020 Mr Cheung sent Mr Greensill an email saying:

“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.”

An SBIA presentation dated 2 November 2020 stated:

“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”.”

On 3 November 2020 Mr Greensill sent Mr Cheung a draft email to go to Mr Son stating that “[t]he following note memorialises what we agreed”, by reference to the email from Mr Cheung dated 2 November 2020 with an amendment as regards to the application of the First Loss for Fair:

“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 to 8 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.)”

In an email to Mr Son on 3 November 2020, Mr Greensill said, “Upon confirmation by return from you, Son-san, that these terms are agreed, I will inform the CEO of Katerra that we are prepared to accept such a haircut on the Greensill facility [i.e. the RPA] as I shall be directed by SBVF to take”.

On 5 November 2020 Mr Jesensky (Head of Portfolio Management, Greensill Group) emailed Mr Garrod and Mr Eadie (also of Greensill) stating:

“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.”

The investment committee (“IC”) of SBIA (comprising Messrs Son, Misra and Romeih), as manager for SVF1, held a meeting by teleconference on 5 November 2020. The IC members recommended and voted to approve SVF1 investing a further $200 million in the Katerra Group (subject to satisfaction of certain conditions), referred to internally as the “Katerra follow-on” investment. At the same meeting, it was recommended that SVF1 decline an investment opportunity into GCPL (by way of a $440m investment in a convertible loan note instrument) in favour of SVF2, SVF1 receiving anti-dilution shares. The minutes stated: “Mr Cheung noted that, for the purpose of insulating Greensill from Katerra's financial distress and in order to address the risk arising from the credit facility to Katerra, … the intention was that Greensill be able to absorb losses from its outstanding U.S. $440 million credit facility to Katerra”.

At the time of the SVF1 IC approval, SVF1 owned 47.4% of the equity in Katerra Cayman, and held 46.1% of the voting rights. The Katerra follow-on investment would result in SVF1 increasing its equity ownership to 51% and its voting rights to 49.9%.

At the time of the SVF1 IC approval, a potential investment was contemplated of $180 million by a “New Money Consortium” led by the Katerra Group’s management, in return for 34% of the equity in the Katerra Group. At that stage the total equity investment into Katerra Cayman was therefore anticipated to be $380 million.

In this regard, by a letter dated 2 November 2020 with the title “Katerra Inc. – Summary of Terms”, the “undersigned Investors” proposed terms and conditions for the purchase of an interest in, and certain transactions related to, Katerra Cayman. The letter was signed on behalf of Commonwealth Real Estate LP, Katerra Cayman, and SBF Abode (Cayman) Ltd. Paragraph 2 of the letter set out the “Pre-Closing Conditions Precedent”, which included at sub-para (iii):

“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.”

A summary produced by SBIA’s risk department stated that the Katerra “Deal Leads” were Mr Jeff Housenbold, Mr Hatim Sukhla and Mr Carpus Tin. The summary was sent by Mr Daula to Messrs Son, Misra and Romeih for the IC meeting of 5 November 2020. The summary included, beside “Use of Proceeds”, that, of the total equity investment of $380 million, “$175M to settle GS facility, remainder to support growth of business until positive case flow is achieved.” The document further included the following:

“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.”

SBIA’s memo for SVF2’s IC dated 5 November 2020 recommended that SVF2 invest $440m on the terms proposed. It stated that the “Deal Leads” were Mr Cheung and Mr Fan, and the “Deal Team” was Ms Chan and Mr Aman Puri and recorded:

“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.”

The summary in the document of the “Key Terms” of the $440m CLN included the following:

“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.”

Under the heading “Use of Proceeds” it stated: “It is anticipated that proceeds will be used to purchase the Katerra notes from external investors and manage the risk internally.”

The proposal as summarised in the memo was approved by SVF2’s IC on 5 November 2020.