Greensill Capital: The Collapse of a Company Built on Debt

LONDON — The courthouse should have already been closed for the day.

At a hearing that began at 5 p.m. on March 1, lawyers for Greensill Capital desperately argued before a judge in Sydney, Australia, that the firm’s insurers should be ordered to extend policies set to expire at midnight. Greensill Capital needed the insurance to back $4.6 billion it was owed by businesses around the world, and without it 50,000 jobs would be in jeopardy, they said.

The judge said no; the company had waited too long to bring the matter to court. A week later, Greensill Capital — valued at $3.5 billion less than two years ago — filed for bankruptcy in London. An international firm with 16 offices around the world, from Singapore to London to Bogotá, was insolvent.

Greensill’s dazzlingly fast failure is one of the most spectacular collapses of a global finance firm in over a decade. It has entangled SoftBank and Credit Suisse and threatens the business empire of the British steel tycoon, Sanjeev Gupta, who employs 35,000 workers throughout the world. Greensill’s problems extend to the United States, where the governor of West Virginia and his coal mining company have sued Greensill Capital for “a continuous and profitable fraud” over $850 million in loans.

At the center of it is Lex Greensill, an Australian farmer-turned-banker, who in 2011 founded his company in London as a solution to a problem: Companies want to wait as long as possible before paying for their supplies, while the companies making the supplies need their cash as soon as possible.

The Australian newspaper that he did the same for President Barack Obama in the United States.

Eventually, Mr. Cameron would become an adviser to Greensill. Julie Bishop, Australia’s former foreign minister, also joined the company as an adviser.

Greensill Capital’s defining year was 2019, when SoftBank’s Vision Fund, the $100 billion investment vehicle built to make huge bets on disruptive technology companies, invested $1.5 billion. On the day the first of two SoftBank investments was announced, Mr. Greensill told Bloomberg TV that his company would have “multiple opportunities” to work with SoftBank and the other companies in their portfolio.

Mr. Greensill had become a billionaire.

Carillion in 2018 and the Spanish renewable energy company Abengoa, which filed for insolvency in February. Abengoa, an early customer of Greensill, narrowly escaped bankruptcy in 2015 when its huge debt load — billions of euros — was revealed.

Regulators, auditors and ratings agencies have grown concerned about the lack of transparency that can make company balance sheets look stronger than they are. In June, the Securities and Exchange Commission asked Coca-Cola to provide more details about whether it was using supply chain finance after noticing an increase in its account payables of $1.1 billion.

After pleas from accounting companies, the rules might be tightened in the United States. In October, the U.S. Financial Accounting Standards Board said it would start developing stronger disclosure requirements, though two months later, an international accounting board decided not to do the same.

For Greensill Capital, signs of trouble began appearing in 2018, the year before SoftBank made its big investments.

GAM, the Swiss asset manager, rocked the London financial community when it suspended one of its top fund managers, Tim Haywood. He later lost his job for “gross misconduct,” Bloomberg reported, after an internal investigation raised questions about investments he made in companies tied to Mr. Gupta, who was fast-becoming a steel and metals tycoon. The middleman in the deals, Bloomberg said, was Mr. Greensill.

The next year, Mr. Greensill’s debt funds were attracting unusual interest from SoftBank. Even as the Vision Fund was investing in Greensill, a different arm of SoftBank poured hundreds of millions into the Credit Suisse funds, according to people with knowledge of the transactions. That arrangement put SoftBank in a complex position: One division was Greensill’s largest shareholder and another was a lender to Greensill, via the Credit Suisse funds.

BaFin said it had uncovered evidence that assets linked to Mr. Gupta listed on the bank’s balance sheet did not exist.

insolvency proceedings for Greensill Bank.

an 18 million euro state-backed loan in December from Greensill Bank. But two days later, the bank abruptly pulled back the funds, said Jean-Philippe Juin, a member of the Confédération Générale du Travail labor union representing the factory, where 600 people work.

While GFG said it had “strong cash flows” across the group, the workers at the Poitou plant were warned last week that there might not be enough money to pay their salaries for March, Mr. Juin said.

“Mr. Gupta presented himself to us as a savior, with hopeful words and many promises,” Mr. Juin said. “In the end, he turned out to be an empty shell.”

Michael J. de la Merced, Stanley Reed, Matthew Goldstein and Raphael Minder contributed reporting.

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