 | |
| Industry | Financial services |
|---|---|
| Founded | 2011 |
| Defunct | 2021 [1] |
| Headquarters | , United Kingdom |
Area served | Worldwide |
Key people | Lex Greensill |
| Website | greensill |
Greensill Capital was a financial services company based in the United Kingdom and Australia. Its main business was the provision of supply chain financing and related services. The company was founded in 2011 by Lex Greensill. It filed for insolvency protection on 8 March 2021. [2]
The firm was founded in 2011, with an initial focus on supply-chain finance. The company had since diversified its revenue streams, offering conventional banking services through a German subsidiary, Greensill Bank (de), the offering of bonds based on debt it has purchased, and through funds managed with partner organisations including Credit Suisse. [3]
American private equity firm General Atlantic invested $250 million in Greensill in 2018. [3] In 2018 Greensill was subject to extended media coverage and a call from British City grandee Lord Myners for a formal investigation of the company's involvement in scandal at Anglo-Swiss asset manager GAM.[ citation needed ]
In early 2019, Softbank invested $800 million in the company through its Vision Fund. [4] This investment allowed Greensill to expand quickly, increasing its employee headcount from 500 at 2019's close to over 1000 in early 2021, [5] located in sixteen offices. [6] Due to the Softbank investment, the firm delayed considering other fundraising options such as an initial public offering. [4] By late 2020, the firm had begun pursuing other investors, aiming to raise between $500 and $600 million and to subsequently complete an IPO within two years. [7] In order to achieve its goal, the company agreed with an order by its board to sell all four of its planes, which included a Gulfstream 650. [7]
In late 2020, Greensill began a search for a new auditor after growing too large for the firm's then auditor, Saffery Champness. [8] KPMG, Deloitte, members of the Big Four, and smaller accounting firm BDO all declined to become Greensill's new auditor. [8]
According to its court filings, Greensill had three main businesses: supply chain financing (also called "reverse factoring" [9] [10] ), accounts receivables financing (also known as "factoring" [11] ) and a practice Greensill called "future accounts receivables finance". [12]
In traditional factoring, a firm will sell the invoices it has issued to clients to a third party; the third party then collects the money owed from those clients. [13] [11] In reverse factoring, a third party (in this case, Greensill) instead pays debts owed by a company to its suppliers at a slight discount, but much more quickly than the original company would have. The third party later receives payment from the company. [13] [11] "Future accounts receivables finance" consists in the lending of money to a company before a sale has been made, based on the expectation of future sales and future payments. [12] Because future accounts receivables finance is based on prospective — and thus uncertain — payments, it is considered to be a risky activity. [14] [15]
Though banks have typically conducted supply chain financing, [16] [17] regulation and capital restrictions targeting them have made such loans less profitable. This regulatory trend has in part led to the emergence of Greensill and other similar firms as they do not face the same level of regulatory scrutiny. [17] Those in favour of reverse factoring say that it benefits suppliers as it settles their debts more quickly. Those critical of the practice generally oppose it as it can allow companies to obscure debts, [18] and encourage habitual late payments by the stronger side in a business relation.
In order to finance its activities, Greensill relied on loans provided by specialised supply-chain investment funds managed by Credit Suisse: Greensill regularly issued notes that were often bought by the investment funds, thereby providing Greensill with cash. [19] The repayment of the loans was secured by Greensill's claims to the repayment of the funds paid to its clients' suppliers. [20] However, according to Bloomberg and The Wall Street Journal , the Credit Suisse investment funds are alleged to have bought notes tied to Greensill's "future accounts receivables finance" activity: these loans were only secured by future and uncertain sales, and were therefore riskier. [20] [21]
On 14 June 2020, the Financial Times reported that Softbank had invested more than $500 million into Credit Suisse investment funds that financed Greensill's activities. Greensill, in turn, provided supply-chain financing to various companies backed by Softbank, in what reporters called a "circular flow of funding". The funds' exposure to Softbank-backed companies amounted to 15% of its assets, according to marketing documents. In addition, the funds' investments has been solely sourced to Greensill, which was itself backed by Softbank. [22] [23] According to a March 2021 report by The Wall Street Journal , the amount placed by Softbank in the Credit Suisse funds were closer to $1.5 billion and had been invested following a request of Lex Greensill to Softbank CEO Masayoshi Son. [24] By July 2020, Softbank had redeemed all of its investments in the Credit Suisse funds. [25] [24] According to Credit Suisse, other investors in the funds "suffered no loss as a result of these relationships". [25] [23]
Until its insolvency, Greensill Capital, along with its German subsidiary Greensill Bank, had a significant exposure to GFG Alliance, a group of businesses associated with steel magnate Sanjeev Gupta. The exposure of Lex Greensill's firms to GFG Alliance totalled $5 billion. [26] [27] Conversely, GFG Alliance depended heavily on financing by Greensill Capital to conduct its operations. [27] GFG Alliance relied especially on Greensill Capital's future accounts receivables finance program. [27] [21] According to the Financial Times, defaults by GFG Alliance are partly responsible for Greensill Capital's ultimate insolvency. [28] On 8 March 2021, Bloomberg reported that GFG Alliance believed it would become insolvent if Greensill collapsed and had defaulted on some of its bonds. [29] In April 2024, Grant Thornton, the administrators for Greensill, published a report where they revealed that they were still owed round $587.2m (£472m) from the GFG Alliance. [30]
In 2020, the German financial regulator BaFin opened an investigation into Greensill Bank's accounting. In March 2021, BaFin filed a criminal complaint against Greensill Bank and banned activity at the bank. [31] [32] [33]
In 2018, former British Prime Minister David Cameron became an advisor to Greensill. While his position was unpaid, he was given shares that could have been worth £70 million in the case of an initial public offering. According to news sources, Cameron lobbied members of the British government on behalf of Greensill. [34] [35] [36] In April 2021, HM Treasury released text messages sent by Chancellor of the Exchequer Rishi Sunak to Cameron from April 2020, which showed that Sunak had "pushed the team" to consider Greensill's request for emergency government-backed COVID-19 loans, before ultimately rejecting their application in June 2020. The Treasury refused to release the messages Cameron sent to Sunak, but revealed that Cameron had also "informally" called two other ministers from the department about the same topic. [37] [38] On 12 April 2021, Prime Minister Boris Johnson ordered an inquiry into the collapse of Greensill and the lobbying efforts of David Cameron. [39] [40] [41]
In June 2021 it was revealed that the government-owned British Business Bank lent Greensill up to $400m without detailed checks being performed. Greensill in turn lent all the funds to eight different companies linked to the steel magnate Sanjeev Gupta. [42] The National Audit Office warned that the taxpayer could lose all the money that was lent, a potential £335m loss. [43]
In July 2020, a group of insurers led by Tokio Marine, which were insuring $4.6 billion of its working capital, announced to Greensill that it would stop providing the coverage. [19] [44] The decision came after Tokio Marine discovered that an employee at one of its subsidiaries had provided coverage that exceeded its risk limits. Greensill tried to obtain an extension of the coverage, including by taking legal action against the insurers, but was ultimately unsuccessful. [44] [21] After this failure, Greensill attempted to secure insurance from other firms, but did not succeed. [6]
On 1 March 2021, Credit Suisse froze $10 billion in funds that were invested in Greensill's financial products and held by its supply-chain investment funds. [14] [45] According to the Financial Times , "Credit Suisse’s concerns about the funds came to a head because insurance policies covering defaults in a portion of its assets lapsed over the weekend." [45] According to The Wall Street Journal , Credit Suisse was also concerned with Greensill's large exposure to companies tied to steel magnate Sanjeev Gupta. [14]
In March 2021, Greensill considered filing for insolvency after the Credit Suisse freeze. [46] On 1 March 2021 The Wall Street Journal reported that Greensill appointed Grant Thornton to help it during a possible restructuring or insolvency filing which was expected to happen within a few days. [14] On 2 March Greensill Capital announced that it was considering selling the operating part of its business, according to a report by Bloomberg News, to Apollo Global Management or an associated firm, Athene Holdings. Greensill Capital stated the firms had a "period of exclusivity with a leading global financial institution with a view to concluding a transaction with them this week," regarding the sale. [47] On 12 March it was announced that the deal with Athene had fallen through. [48] The deal collapsed in part due to the low value of Greensill's assets, which were further reduced by the preservation of technology firm Taulia, through a partnership between Taulia, JPMorgan Chase, and other banks. [49] [50] Taulia facilitates lending from several finance companies to clients, but counted Greensill as a major source of business. With Greensill's role as a lender through Taulia taken over by JPMorgan, Athene had fewer reasons to acquire Greensill's book of business.
On 8 March 2021, Greensill filed for insolvency protection, as it found itself unable to repay a $140 million loan to Credit Suisse and was "hit by defaults" from Sanjeev Gupta's GFG Alliance, one of its main customers. [2] [28]
As of 25 March 2021, Credit Suisse executives estimated that the investors in its supply-chain funds could sustain losses of up to $3 billion. Prior to Greensill's insolvency, the funds' assets amounted to $10 billion. [51]
On 15 March 2021, Bluestone Resources Inc., a coal mining company owned by West Virginia governor Jim Justice, sued Greensill for fraud. It alleges that Greensill departed from standard supply chain finance to engage in a more speculative practice, offering loans not only based on debts that other companies had already incurred, but also based on transactions that Greensill predicted would occur in the future. [52] [53] On 31 May 2021, it was revealed that Governor Justice had personally guaranteed the loans received from Greensill, totaling nearly $700 million. [54]
A number of German towns and cities have pulled their money from small, private banks after losing millions of euros in the closure of Greensill. [55]
Credit Suisse's chief risk and compliance officer and its head of investment banking were reported to have resigned, due to losses from Greensill's collapse and $4.7 billion in losses associated with Archegos Capital Management. [56]
Investment banking is an advisory-based financial service for institutional investors, corporations, governments, and similar clients. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by underwriting or acting as the client's agent in the issuance of debt or equity securities. An investment bank may also assist companies involved in mergers and acquisitions (M&A) and provide ancillary services such as market making, trading of derivatives and equity securities, FICC services or research. Most investment banks maintain prime brokerage and asset management departments in conjunction with their investment research businesses. As an industry, it is broken up into the Bulge Bracket, Middle Market, and boutique market.
SoftBank Group Corp. is a Japanese multinational investment holding company headquartered in Minato, Tokyo, Japan which focuses on investment management. The group primarily invests in companies operating in technology that offer goods and services to customers in a multitude of markets and industries ranging from the internet to automation. With over $100 billion in capital at its onset, SoftBank's Vision Fund is the world's largest technology-focused venture capital fund. Fund investors included sovereign wealth funds from countries in the Middle East.
GE Capital was the financial services division of General Electric. Its various units were sold between 2013 and 2021, including the notable spin-off of the North American consumer finance division as Synchrony Financial. Ultimately, only one division of the company remained, GE Energy Financial Services, which was transferred to GE Vernova when General Electric was broken up.
Credit Suisse Group AG is a global investment bank and financial services firm founded and based in Switzerland as a standalone firm but now a subsidiary of UBS. According to UBS, eventually Credit Suisse will be fully integrated into UBS but while the integration is not complete both banks are operating separately. Headquartered in Zürich, as a standalone firm it maintained offices in all major financial centers around the world and provided services in investment banking, private banking, asset management, and shared services. It was known for strict bank–client confidentiality and banking secrecy. The Financial Stability Board considered it to be a global systemically important bank. Credit Suisse was also a primary dealer and Forex counterparty of the Federal Reserve in the United States.
Asset-based lending is any kind of lending secured by an asset. This means, if the loan is not repaid, the asset is taken. In this sense, a mortgage is an example of an asset-based loan. More commonly however, the phrase is used to describe lending to business and large corporations using assets not normally used in other loans. Typically, the different types of asset-based loans include accounts receivable financing, inventory financing, equipment financing, or real estate financing. Asset-based lending in this more specific sense is possible only in certain countries whose legal systems allow borrowers to pledge such assets to lenders as collateral for loans.
Capital One Financial Corporation is an American bank holding company founded on July 21, 1994 and specializing in credit cards, auto loans, banking, and savings accounts, headquartered in Tysons, Virginia with operations primarily in the United States. It is the 12th largest bank in the United States by total assets as of December 31, 2022, the third largest issuer of Visa and Mastercard credit cards, and one of the largest car finance companies in the United States.
Small Industries Development Bank of India (SIDBI) is the apex regulatory body for overall licensing and regulation of micro, small and medium enterprise finance companies in India. It is under the jurisdiction of Ministry of Finance, Government of India headquartered at Lucknow and having its offices all over the country.
"Too big to fail" (TBTF) is a theory in banking and finance that asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and therefore should be supported by government when they face potential failure. The colloquial term "too big to fail" was popularized by U.S. Congressman Stewart McKinney in a 1984 Congressional hearing, discussing the Federal Deposit Insurance Corporation's intervention with Continental Illinois. The term had previously been used occasionally in the press, and similar thinking had motivated earlier bank bailouts.
Blackstone Credit, formerly known as GSO Capital Partners (GSO) is an American hedge fund and the credit investment arm of The Blackstone Group. Blackstone Credit is one of the largest credit-oriented alternative asset managers in the world and a major participant in the leveraged finance marketplace. The firm invests across a variety of credit oriented strategies and products including collateralized loan obligation vehicles investing in secured loans, hedge funds focused on special situations investments, mezzanine debt funds and private equity funds focused on rescue financing.
A merchant cash advance(MCA) is a type of business funding or loan that is repaid by the lender taking a percentage of the businesses' daily credit or debit card income, directly from the payment processor. The term Merchant Cash Advance is commonly used to describe a variety of small business financing options characterized by purchasing future sales revenue in exchange for short payment terms (generally under 24 months) and small regular payments (typically paid each business day) as opposed to the larger monthly payments and longer payment terms associated with traditional bank loans.
Ftrans Corp. is an Atlanta, GA based provider of technology enabled collateral monitoring services to banks for monitoring their commercial and industrial loan portfolios. Founded in 2004, Ftrans provides commercial lending services to banks and receivables services to bank clients (borrowers) in the United States. Ftrans was listed on the Inc. 500 list of the fastest growing private companies in the United States in 2009 and on the Inc. 5000 list in 2010, and was ranked 13th in the Financial Services category after posting 718% growth in 2009.
Mizuho Americas was established on July 1, 2016 as a US bank holding company, as the American corporate and investment banking arm of the Tokyo-based Mizuho Financial Group.
SoFi Technologies, Inc. is an American personal finance and financial technology company. Founded in 2011 at Stanford University, it operates as a direct bank and supports other financial institutions through its technology platform. As of 2024, SoFi reports 9.4 million customers and 160 million platform accounts.
Liberty Steel Group Holdings UK Ltd (LSG), which is also referred to as Liberty House or Liberty House UK, is a British industrial and metals company founded in the United Kingdom in 1992 by industrialist Sanjeev Gupta. It is headquartered in London, England, and has offices in Dubai, Singapore and Hong Kong.
Sanjeev Gupta is an Indian-born British businessman, and the founder of Liberty House Group. He is the CEO and chairman of GFG Alliance, an international conglomerate that operates primarily in the steel and mining industries. Following the collapse of Greensill Capital in 2021, Sanjeev Gupta has been under scrutiny for his ties to the failed company, which involved opaque financing and sales invoices that Greensill's administrator has been unable to verify.
Funding Societies is a Southeast Asian digital financing platform for small and medium-sized enterprises (SMEs), headquartered in Singapore. It was the first such platform in Singapore to engage an escrow agency to independently and safely manage investors’ funds. In Indonesia it is known as Modalku. Since its launch, it has disbursed more than US$2.6 billion in business financing to MSMEs through more than 5.1 million loan transactions.
Gupta Family Group Alliance is an international group of businesses associated with businessman Sanjeev Gupta and the British Gupta family. Collectively, companies in the alliance are involved in mining, industry and trading.
Alexander David "Lex" Greensill is an Australian former businessman best known for being the founder of Greensill Capital, a company focused on supply chain finance and derivative financial products that on 8 March 2021 filed for insolvency protection and faced legal scrutiny.
Archegos Capital Management was a limited partnership family office that managed the personal assets of Bill Hwang, at one time managing over $36 billion in assets. On April 27, 2022, Hwang was indicted and arrested on federal charges of fraud and racketeering.
The Greensill scandal was a political controversy in the United Kingdom related to lobbying activities on behalf of financial services company Greensill Capital. It implicated former Prime Minister David Cameron, former Cabinet Secretary Jeremy Heywood and several other civil servants, and occurred during the COVID-19 pandemic.
{{cite news}}: CS1 maint: multiple names: authors list (link)