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Greensill Capital, a financial firm backed by SoftBank and advised by former Prime Minister David Cameron of Britain, on Monday filed for administration, a type of bankruptcy protection in Britain, after a swift collapse.
Greensill, which provides financing to companies, is a complicated web of businesses around the world dependent on insurance and easy access to capital markets. When Greensill’s insurer refused on March 1 to renew its coverage for the company’s loans, everything fell apart in a matter of days. Apollo Global Management, an American hedge fund, is reportedly in talks to buy some parts of the business.
Greensill Capital declined to comment.
The company was founded in 2011 by Lex Greensill, who had moved to Britain from Australia in his 20s and worked at Morgan Stanley and Citigroup. Mr. Greensill set up his company after his parents, who had a sugar cane and melon farm, struggled financially because of long waits for payments for their produce, the company said on its website. Greensill offers supply chain financing by paying suppliers on behalf of companies and collecting the payments from the buyers later. Greensill also helps companies raise money in credit markets using their invoices as collateral.
The loans Greensill makes to the companies are put into funds and then sold. Credit Suisse, which had sold $10 billion in investment funds based on assets put together by Greensill, froze the funds last week. The Swiss bank said on Friday that it would liquidate the funds and begin returning cash to investors within days. The Financial Times reported on Monday that Credit Suisse was also demanding the repayment of a $140 million loan to Greensill that the company could not pay back.
Lawyers for Greensill in Australia, where the parent company is registered, told a court last week that without the insurance, more than 50,000 jobs were at risk. The insurance covered about $4.6 billion in Greensill assets from 40 clients. The court documents suggest that the insurer had been investigating its relationship to Greensill since the summer.
Last week, Germany’s bank regulator froze activities at Greensill’s unit there, Greensill Bank. BaFin, the regulator, said an audit had uncovered evidence that assets reported by the bank did not exist.
German prosecutors in Bremen, where the Greensill unit is based, have opened an investigation.
In the past decade, Mr. Greensill has risen through the ranks of the British establishment. He advised Mr. Cameron’s government on supply chain financing just a year after setting up his company. In 2017, he received the honor of Commander of the British Empire, and the next year, Mr. Cameron became an adviser to Greensill.
In 2019, SoftBank invested $1.46 billion in Greensill, which was used to fuel international expansion. That year, Greensill said it extended $143 billion to more than eight million customers. SoftBank declined to comment on the bankruptcy filing.
Michael de la Merced, Jack Ewing and Stanley Reed contributed reporting.
Article source: https://www.nytimes.com/live/2021/03/08/business/stock-market-today/