The Collapse of Greensill Capital

The Collapse of Greensill Capital Explained

SoftBank-backed Greensill Capital (a fintech company) lent billions of dollars to companies that included the highly indebted metals conglomerate GFG Alliance, silicon valley Construction Technology company Katerra and West Virginia mining company Bluestone Resources. These loans were packaged into bonds which were sold as a fund by Credit Suisse.

Greensill was funded by its own German-based and regulated bank and via Zurich-based Credit Suisse Asset Management. Its main shadow banking operations were in London.

German regulators BaFin last month seized control of the bank and filed a criminal complaint alleging balance sheet manipulation. Swiss and Australian officials are asking questions of Credit Suisse. Meanwhile, in the UK, where it has been celebrated as a leading “fintech” and counted former prime minister David Cameron as an adviser, there is little sign of regulatory action.

In the lead up to this crisis Lex Greensill and his family took $200 million out of the company.

No one knows the precise amount of bad loans involved: Credit Suisse is budgeting for at least $1bn to $2bn; insurance policies covered at least $4.6bn; in July last year insurer Tokio Marine said an underwriter had breached exposure limits by writing coverage for more than $7bn. And no one is sure who will bear the losses.

GFG has already defaulted on loans to Greensill. Some of those loans exist within Credit Suisse funds. Those funds have insurance written by the likes of Insurance Australia Group and Tokio Marine. IAG says it has no “net insurance exposure” to Greensill because of “extensive reinsurance” and “agreements with Tokio Marine for it to hold any remaining exposure”. Tokio Marine, in turn, says it also has reinsurance, it may turn to litigation and, anyway, the insurance may not have been valid in the first place.

This looming fight between loan originators, securitisers, funds, banks, insurers and investors looks very like the fallout from the 2008 crisis. The lawsuits that followed took up to a decade to resolve and cost tens of billions of dollars. For now, there is little general market turmoil. But it could still get messier.

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Links
Supply Chain Financing Patent: https://patents.google.com/patent/US6167385A/en
Court Hearing NSW https://www.caselaw.nsw.gov.au/decision/177f18936157b0e4a1349f9d

Articles
Inside the scandal that rocked GAM: https://www.ft.com/content/56e5b0ba-39ed-11e9-b856-5404d3811663

Sanjeev Gupta lived large on the back of rickety financing: https://www.ft.com/content/8d5956d2-33e0-4ab0-a6d9-76cf63929bd9

BaFin pushes Greensill Bank to reduce its exposure: https://www.ft.com/content/44c47737-5d8b-4aca-8ff3-dbcc8349bc04

GFG Alliance stops payments to stricken Greensill: https://www.ft.com/content/c2be5828-a4d1-475f-96ba-de239ae968a7

Bafin closes Greensill Bank: https://www.businessinsider.com/bafin-closes-bremer-greensill-bank-what-this-means-for-fixed-deposit-of-thousands-of-german-investors

Katerra gets $200 million SoftBank lifeline: https://techcrunch.com/2020/12/31/after-burning-through-2-billion-katerra-gets-a-200-million-softbank-lifeline-to-escape-bankruptcy/

SoftBank Put $400 Million Into Greensill Before Collapse: https://www.wsj.com/articles/softbank-put-400-million-into-greensill-months-before-collapse-11615319255

Credit Suisse’s funds missed out on SoftBank injection: https://www.ft.com/content/d2a6d829-f27e-4668-bcc0-14cc2441fa17

David Cameron lobbied for access to Covid loan schemes: https://www.ft.com/content/6ed619c0-bb9a-44dc-a2f6-c5596a958ca8

The finance inventor at Greensill Capital: https://www.ft.com/content/c02ba2e1-71d2-4fb1-8166-4ad712b4ace2

Lex Greensill’s Dreams Unraveled in Days: https://www.bloomberg.com/news/articles/2021-03-11/how-lex-greensill-s-7-billion-empire-unraveled-in-days

Cameron lobbied on behalf of Greensill Capital : https://www.theguardian.com/politics/2021/mar/19/cameron-lobbied-uk-government-behalf-greensill-access-covid-loans-reports-says

Greensill family cashed out before collapse: https://www.ft.com/content/40d3ab62-cfff-4275-b6c1-3f1353b8e933
Blog Posts

John Hempton Bronte Capital blog posts: http://brontecapital.blogspot.com/
Behind The Balance Sheet Blog: https://club.behindthebalancesheet.com/c/members-area/greensill-continued

Видео The Collapse of Greensill Capital канала Patrick Boyle