Sanjeev Gupta, Greensill and credit Suisse. How a business empire collapsed. Lex Greensill’s business opened at a fast pace, leaving a devastating trail of destruction around it.
On Monday, Greensill Capital applied for management in the UK, holding the shocking collapse of its founder. A German-owned bank has been shut down by regulators, the funds they have been working with Credit Suisse are being liquidated and his company is in the process of breaking its backbone, which was probably sold to Athene Holding Ltd.
Greensill himself has lost his multi-billion dollar position, and the many strands tied to the fall include everything from investments to the steel industry to the British health system.
Here is a rundown of important statistics, what happened, and what might follow:
Lex Greensill: An increase in finances took him from his family farm in Queensland, Australia to the banks of Wall Street, and set up his own company. It provides transaction fees to firms, speeding up payment to suppliers. A fundraiser was planned for last year’s $ 7 billion fundraiser.
Sanjeev Gupta: A former commodity merchant was once called the “Man of Steel,” Gupta leads the GFG Alliance. Many businesses, including steel, aluminum and renewable energy, were built at a rapid pace that saw him spend $ 6 billion over a five-year period buying and renovating unpopular steel products.
Credit Suisse Group AG: Swiss lenders have spent $ 10 billion on a secure loan from Greensill. It eliminates costs and refunds to customers. The manager of the Swiss asset GAM Holding AG has also decided to close a fund linked to Greensill. At Credit Suisse, these commitments add $ 140 million to the bridge loan extended to Greensill last year.
SoftBank Group Corp.: Vision Fund of Japan’s financial institution, a major investor in technology implementation, invested $ 1.5 billion in Greensill in 2019. Estimates have now been written down and are thought to have been reduced to near zero, according to people familiar with the matter.
The problem started with Bond & Credit Company, Sydney’s subsidiary of insurance company Tokio Marine Holdings Inc. last summer. It has also decided about not extending the policies that includes the leading of the Greensill, and has fired a manager who played a key role in signing the business. To sum up Greensill’s problems, at the same time, German regulator BaFin launched an investigation into his fast-growing bank in Bremen.
BaFin was on the other hand also concerned that too many Greensill Bank assets were tied to the same source. The investigation found irregularities, including the bank’s booking of claims for transactions made by Gupta that had not yet taken place but which were considered to have existed. At this time of increasing pressure, in late 2020 Softbank has written down its investment in Greensill, although this has come to light in recent weeks.
The situation had escalated in the month of February, when pressure from BaFin saw Greensill seek out potential buyers through Gupta’s exposure. Initiated negotiations with Athens and Apollo Global Management Inc. to sell certain assets, but the dire situation has put Greensill’s sponsors and investors at risk.
In Australia, Greensill lost the legal battle to get the Bond and Credit Company to extend insurance that ended March 1. Without this consolidation, credit quality was questioned, property valuation was difficult, and Credit Suisse suspended funds linked to Greensill, citing “great uncertainty. GAM has followed suit, and on 3rd March, the German financial regulator closed down the Greensill Bank in order to save the money for investors and creditors.
Greensill’s management is really trying to save the company as the financial crisis has begun. But there is no denying fear as many directors boarded the ship and they had also left the company.
There is also the fall of the real world. In the UK, the National Health Service has had to pay for pharmacies directly rather than relying on Greensill Capital, putting more strain on its epidemic costs. German municipalities that invested in Greensill Bank are now at risk of losing their money.
For Gupta, it looks like Greensill could go down with the GFG. Court documents show the GFG’s warning that if it loses Greensill’s money, it will “fall into debt.” The Spanish government has already asked the GFG unit to prove it is a solution before it is allowed to proceed with the aluminum plant, according to people familiar with the matter. Athens, which is in talks to buy goods tied to Greensill, has reportedly released goods linked to the Guptas in the negotiations.
The situation is affecting many parts of the Gupta empire. The Bank of England has instructed the Guptas to invest 75 million pounds in Wyelands Bank, owned by GFG, to recover the proceeds from the sale.
The next steps
Greensill: Negotiations continue in Athens after insolvency, with a Bermuda-based annuity seller promising nearly $ 60 million in Greensill’s IT and intellectual property, court documents show. Greensill will still have to deal with the collapse of BaFin’s criminal complaint.
Sanjeev Gupta: Greensill’s collapse of grace cuts off an important financial source from the list of businesses that make up his empire. Without new funding, that could mean a problem for the GFG Alliance and the 35,000 people it employs in 30 countries.