Bloomberg
Greensill’s Overnight Downfall Was Many Months in Making
(Bloomberg) — From the outside, 2020 was bringing validation to the idea behind Lex Greensill’s financial empire.His eponymous firm was seeking funds at a lofty valuation with the pitch that the pandemic laid bare small suppliers’ need to be paid quickly.But by the middle of last year, two parallel sets of events were quietly threatening two of the biggest sources of funding that enabled his brand of financial disruption — eventually bringing the firm to a breaking point.In July, an obscure Australian insurer refused to extend policies covering the loans Greensill made, taking away the security blanket that allowed major investors like Credit Suisse Group AG to get comfortable with his courting clients below their radar. And around the same time, the German regulator BaFin started a probe into his fast-growing bank in Bremen.At issue in both cases was the question of risk, and in BaFin’s case, the amount of it that was tied to another entrepreneur in Greensill’s inner circle, Sanjeev Gupta. He had been an early client and investor in Greensill, and the loans to Gupta’s firms fueled the growth of both men’s conglomerates.Interviews with more than a dozen people familiar with the matter show how the twin threads unraveled rapidly this week, bringing Greensill’s firm to the verge of collapse. Started a decade ago with a promise of “making finance fairer” — attracting backers such as SoftBank Group Corp. and advisers like former U.K. Prime Minister David Cameron — Greensill Capital’s swift spiral now is risking thousands of jobs at borrowing companies, disrupting the supply chains of multinationals and even the U.K. healthcare system.It has been a stunning comedown for a firm that as recently as last year was touting a valuation of $7 billion. Greensill Capital is planning to start insolvency proceedings in the U.K. as it seeks to sell its operating business to Athene Holding Ltd., the annuity seller backed by Apollo Global Management. And Germany’s financial watchdog shuttered Greensill Bank after asking law enforcement officials to investigate accounting irregularities at the lender.Greensill, whose interest in supply-chain finance stemmed from his early years working on his family’s farm in Australia, carved a niche for himself in a fast-growing business that saw a boost in the years following the global financial crisis more than a decade ago. Banks were pulling back from lending to smaller firms, as regulations around risky lending practices grew increasingly more onerous.Cameron, GuptaTo lawmakers eager to stimulate a recovery, supply chain finance seemed like the perfect solution. In 2012, then-Prime Minister Cameron announced a supply-chain finance program that was designed to get funding to small companies quicker. Greensill was an adviser to the U.K. government on that program, and in 2017 was anointed as a Commander of the British Empire for his services to the economy.Greensill had started his own firm in 2011 after stints at Morgan Stanley and Citigroup Inc., later attracting $1.5 billion of investment from SoftBank Group Corp. The firm says it provided $143 billion in financing last year.Over the years, Greensill has also been closely linked to British-Indian businessman Gupta, the man once dubbed the “savior of steel” by the U.K. press because of his penchant to buy up moribund steel plants.Greensill’s links to Gupta have roiled other money managers. Long-dated project finance notes tied to Gupta’s GFG Alliance and arranged by Greensill were at the center of an investigation that prompted the suspension of GAM Holding AG’s one-time star Tim Haywood in 2018.BaFin’s AuditBaFin last year started a forensic audit of Greensill Bank, charging KPMG with the task, after concerns emerged that too many of the assets on the bank’s books were ultimately tied to the same source: Gupta.Gupta, a former…
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