Bloomberg
Greensill, Gupta and the fragile tower made of money and metal
(Bloomberg) – Lex Greensill’s business has rapidly disintegrated, leaving a tangled trail of destruction. On Monday, Greensill Capital filed for administration in the UK and was able to complete an amazing breakdown for its founder. The bank he owns in Germany has been closed by regulators, the funds he manages in collaboration with Credit Suisse are being liquidated, and his company is currently being liquidated, with its core possibly being transferred to Apollo-backed Athene Holding Ltd. on sale is. Greensill himself has lost his billionaire status, and the myriad strands that tangled in the collapse spanned everything from mutual funds to the steel industry to the UK healthcare system. Here’s a rundown of the key characters, what happened, and what might be next: The Players: Lex Greensill: The Financier’s Rise took him from his family’s farm in Queensland, Australia to the banks on Wall Street and then to start his own company. It provides supply chain finance to businesses and expedites payments to suppliers for a fee. It had a fundraiser planned last year that would be valued at $ 7 billion. Read more about Lex Greensill here. Sanjeev Gupta: A former commodities trader, sometimes referred to as a “man of steel”, Gupta heads the GFG Alliance. Much of the business, which includes steel, aluminum, and renewables, grew at a breakneck pace, spending approximately $ 6 billion over five years buying and upgrading unloved metal assets. Greensill was by far his biggest backer, and the lender’s collapse puts him in search of new funding. Credit Suisse Group AG: The Swiss lender ran a $ 10 billion suite of funds that bought securitized loans from Greensill. It’s about handling the money and giving money back to the customers. The Swiss asset manager GAM Holding AG has also decided to close a fund affiliated with Greensill. At Credit Suisse, the connections also include bridge loans of USD 140 million that were granted to Greensill last year. SoftBank Group Corp .: Japanese financial institution’s Vision Fund, a mammoth investor in tech startups, invested $ 1.5 billion in Greensill in 2019, which has lowered its valuation and is considering lowering it close to zero, according to the Matter familiar to people. Background The crisis began at Bond & Credit Company, the Sydney unit of insurance giant Tokyo Marine Holdings Inc., last summer. It has decided not to extend the guidelines on the loans granted by Greensill and has laid off a manager who played a key role in signing that deal. Around the same time, the German supervisory authority BaFin tightened the investigation of its fast-growing bank in Bremen. BaFin feared that too many of Greensill Bank’s assets were tied to the same source: Gupta. The investigation found irregularities, including the fact that the bank had booked receivables for transactions by Gupta that had not yet occurred but were accounted for as if they had. During this slow build-up of pressure, Softbank wrote off its Greensill investment in late 2020, though this has only been revealed in the past few weeks. The situation accelerated in February when Greensill sought potential buyers for its investment in Gupta under pressure from BaFin. Talks have started with Athene and Apollo Global Management Inc. to sell some assets, but the deteriorating situation had put Greensill supporters and investors on alert. Read More: Credit Suisse Missed Many Warnings Before Greensill Collapsed Talks To Repay Greensill’s Debt To Avoid Fire Sales The Fallout In Australia Greensill lost a legal battle to get the Bond and Credit Company to get the March 1st insurance policy expired to extend. Without this coverage, credit quality has been challenged, asset valuations have hardened, and Credit Suisse has frozen Greensill-affiliated funds, citing “significant uncertainty”. GAM followed suit, and on March 3, Germany’s financial regulator closed Greensill Bank to save money for depositors and creditors. Greenill executives were desperate to save the company as bankruptcy threatened. But the panic was undeniable when several directors jumped on the ship and left the company, including Lex Greensill’s brother. There was real fallout too. In the UK, the National Health Service had to pay pharmacies directly rather than relying on Greensill Capital, which further weighed on pandemic-hit finances. German municipalities that parked funds at Greensill Bank are now at risk of losing their money. For Gupta, it appears that Greensill could use it to mine GFG. Court documents show GFG warns that if Greensill lost funding it would “go bankrupt”. The Spanish government has already asked a department of GFG to prove their solvents before they can go ahead with the takeover of an aluminum plant to people familiar with the matter. Athena, who is in talks about buying assets tied to Greensill, has reportedly excluded Gupta-tied assets from the discussions. The Bank of England has ordered Gupta to invest £ 75 million in Wyelands Bank, owned by GFG, to return retail deposits. The Next StepsGreensill: Talks with Athene continue after filing for bankruptcy, with the Bermuda-based annuity seller offering about $ 60 million in court documents show Greensill owns IT and intellectual property. Greensill will continue to have to deal with the consequences of BaFin’s criminal complaint. Gupta: Greensill’s fall from grace cuts an important source of funding for the multitude of companies that make up his empire. Without fresh money, this could mean trouble for the GFG Alliance and the 35,000 employees in 30 countries. Gupta’s operation produced 5 million tons of steel in 2019 and has the capacity to produce more than 300,000 tons of aluminum per year. GFG is in talks to negotiate a grace period on its debt obligations to Greensill that would help the group avert bankruptcy and avoid an asset fire sale. Credit Suisse: The result is another black eye for the Swiss bank’s risk policy and another blow for an asset management unit that has already been audited. The funds, which the bank touted as a success story back in December, are now facing a long downturn. Investors will get some cash right away, but will have to wait a long time to see how much their wealth was really worth. SoftBank: The investing giant can mark this as a bet that didn’t work out. Now it will turn its attention to ensuring that other startups funded by Greensill find ways to replace that funding. (Updates with Gupta Debt Relief Talks.) For more articles like this one, visit bloomberg.com. 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