How Greensill Was My Valley: Alternative Supply Chain Provider Forced into Administration

How Greensill Was My Valley: Alternative Supply Chain Provider Forced into Administration​

The Story

According to the BBC, “the government is bracing itself for taxpayer intervention as it all unravels”. The UK steel industry, heavily reliant on Sanjeev Gupta’s GFG Alliance, could lose 5000 jobs as a result of reliance on funding from Greensill Capital (BBC). Greensill, an ‘alternative supply chain finance provider’, specialised in providing upfront cash, lending on creditworthiness and financial strength. Greensill would pay the supplier – here, Liberty Steel – in advance for goods on the basis of invoices, not unlike large scale payday lending. But the company, which was founded by Australian ex-sugarcane farmer Lex Greensill CBE, seems to have been betting on the future – and more than half of its loans were to GFG. Smelling a rat, on 1 March 2021 Greensill’s insurer (Tokio Marine) refused to renew the US $4.6 billion insurance for its loans, and on 8 March 2021, Greensill was forced into administration.

On 16 March 2021, a lawsuit was filed in New York alleging fraud. Between 2018 and 2021, Bluestone Resources Inc., a coal-mining company owned by West Virginia (USA) Governor Jim Justice, borrowed $850 million from Greensill Capital (Wall Street Journal). According to the Bluestone lawsuit, Greensill was not only issuing credit on the basis of actual invoices, but also using speculative ‘future’ invoices and even ‘future’ clients (Financial Times). In another uncomfortable twist, former UK Prime Minister David Cameron (a Greensill adviser since 2018) lobbied Whitehall ex-colleagues in 2020 to enable Greensill Capital to access the government’s Covid-19 Corporate Financing Facility loan scheme, a move that was rebuffed (Financial Times).

Greensill also owned fintech platform Earnd. Clients’ employees, including staff from JD Sports and seven NHS trusts, were able “to draw down a portion of their pay immediately after a shift.” (NHS). Earnd offered the service to NHS workers for free during the pandemic and Lex Greensill has allegedly offered to meet any shortfall personally (Financial Times). The NHS has already had to make up the deficit for pharmacies in an early payment scheme that Greensill took over from Citibank in 2018, “making more than £1.2 billion of supply chain finance payments a year” (ChemistAndDruggist).

What It Means For Businesses and Law Firms

Lex Greensill and his family cashed out on about US$200 million shares in 2019, during a SoftBank Vision Fund investment round. Meanwhile, staff made redundant in Australia and a German bank are making claims (Guardian), pension funds are at risk (Telegraph) and SoftBank, the main creditor, is owed around US $1.15 billion (Reuters).

Swiss lender Credit Suisse is racing for damage limitation, advised on Greensill’s administration by Latham & Watkins and Morgan Lewis. $10 billion in funds marketed to its clients as safe investments were exposed to the Greensill collapse (Financial Times). Grant Thornton was appointed to advise on the administration, with Allen & Overy (A&O) advising Greensill.

A number of law firms have previously advised Greensill. The finance provider previously turned to Allen & Overy in July 2019, when White & Case LLP advised SoftBank Vision Fund on its $800 million investment in Greensill. That deal valued the company at approximately $3.5 billion. In June 2020, Baker McKenzie advised Greensill on the acquisition of Omni, Latin America’s foremost digital lender to SMEs.

Moreover, a possible asset purchase by Apollo is being negotiated by Kirkland & Ellis in tandem with Mayer Brown (The Lawyer). According to Greensill.com, “The Joint Administrators are in continued discussion… in relation to the purchase of certain Greensill Capital assets.” The UK metal industry, meanwhile, is steeling itself.

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