World reacts to Greensill Capital’s ‘chain of destruction’ | Alds

The Sydney Morning Herald revealed Greensill Captial “waited only until recently” to inform financial backer Credit Suisse that it had no insurance for nearly $6 billion worth of company assets.

The new development surfaced after Credit Suisse froze billions of dollars of funding for the lender, kicking off an explosive chain of events that has rocked the financial industry.

Greensill Capital reportedly plans to file for insolvency in the UK this week.

German regulators are looking into the company’s finances. In a statement, BaFin said: “BaFin found that Greensill Bank AG was unable to provide evidence of the existence of receivables in its balance sheet that it had purchased from the GFG Alliance Group. For this reason, BaFin has already taken extensive measures to secure the bank’s liquidity and to limit risks for Greensill Bank AG and has appointed a special representative for the bank.”

Bloomberg coldly labelled the struggling Aussie an “ex-billionaire”, who has faced an astonishing setback after growing his company into one of the world’s largest supply-chain finance firms, providing large companies like Telstra with funds to pay bills early.

Mr Greensill founded the company in 2011. The Aussie currently resides in the UK, rubbing shoulders with British elites such as former PM David Cameron — who he hired as an advisor — and Prince Charles, who presented him with a CBE for “services to the economy” in 2017.

The Financial Times declared Mr Greensill’s “vision is in tatters” after a decade of success, questioning the Aussie’s ethos as a saviour of small business and denouncing the “chain of destruction” set in motion by recent decisions.

“The company had frequently portrayed itself as a saviour of small business, proclaiming that it was ‘making finance fairer’ and ‘democratising capital’,” Robert Smith wrote. “Yet, Greensill’s lawyers this week painted a stark picture of the chain of destruction that a messy collapse could unleash: many of their corporate clients were “likely to become insolvent”, putting over 50,000 jobs around the world at risk.”

Mr Greensill is expected to announce a sell-off of the majority of the business US group Apollo Asset Management shortly.

WHAT WENT WRONG AT GREENSILL CAPITAL?

Greensill had obtained credit insurance to ensure investors holding its debt packages would be paid out in the event one of the underlying customers defaulted on a payment.

But as early as July last year, Greensill’s insurers had informed the company they had no intention of extending the coverage past March 1 this year.

Incredibly, the company only sought legal advice about its position last week.

Greensill went to the NSW Supreme Court asking for an emergency injunction that would have extended its insurance coverage.

Barrister Ruth Higgins SC told the court Greensill faced “catastrophic” consequences if the policies were not renewed. “Greensill Bank will be unable to provide further funding for working capital of Greensill’s clients,” she said in an affidavit.

“In the absence of that funding, some of Greensill’s clients are likely to become insolvent, defaulting on their existing facilities. That, in turn, may trigger further adverse consequences on third parties, including the employees of Greensill’s clients. Greensill estimates that over 50,000 jobs including over 7000 in Australia may be at risk.”

The emergency injunction was refused.

– with Frank Chung