German financial supervision has directly overseen the day-to-day operations of Greensill Bank, with the lender’s troubled parent company warning that its $ 4.6 billion loss of credit insurance could lead to a wave of defaults and 50,000 losses jobs.
BaFin has appointed a special representative to oversee Greensill Bank’s activities in recent weeks, according to three people familiar with the matter, as concerns grew over the state of the lender’s balance sheet.
The Germany-based lender is part of a group – advised by former UK Prime Minister David Cameron and backed by SoftBank – that stretches from Australia to the UK and is now fighting for its survival.
On Monday evening, Greensill was denied an injunction by an Australian court after the financial group tried to prevent its insurers from withdrawing its coverage.
Lawyers for Greensill said that if policies covering loans to 40 companies were not renewed, Greensill Bank would be “unable to provide additional funding for the working capital of Greensill clients”, some of whom were “likely to become insolvent, defaulting on their existing facilities ”. .
This in turn could “lead to other adverse consequences”, endangering more than 50,000 jobs worldwide, including more than 7,000 in Australia, the company’s lawyers told the court.
A judge ruled that Greensill delayed his application “despite the fact that the underwriters’ position was clearly established eight months ago” and dismissed the injunction.
Greensill Capital is in talks with Apollo over a possible bailout deal, involving the sale of certain assets and operations. He also sought protection from the Australian insolvency regime.
Greensill received a heavy blow on Monday when Credit Suisse suspended $ 10 billion in funds related to the company’s supply chain finance, citing “considerable uncertainty” on the valuation of fund assets. A second Swiss fund manager, GAM, also severed ties on Tuesday. Credit Suisse’s decision came after credit insurance expired, according to people familiar with the matter.
While the bulk of Greensill’s business is based in London, its parent company is registered in the Australian town of Bundaberg, the hometown of its founder Lex Greensill.
In Germany, where Greensill has owned a bank since 2014, BaFin, the financial watchdog, relies on a section of German banking law that authorizes the regulator to parachute to a special representative in charge of “carrying on business. in an institution and assign [them] the required powers ”.
The regulator has been conducting a special audit of Greensill Bank for six months and may soon impose a moratorium on the bank’s operations, the people said.
Regulators are increasingly concerned about the quality of some of the debt Greensill Bank holds on its balance sheet, two people said. Regulators are also currently reviewing the assurance the lender has said is in place for its claims.
Greensill Bank provided much of the funding to GFG Alliance, a sprawling empire controlled by industrialist Sanjeev Gupta.
“A regulatory audit of the bank has been underway since the fall,” said a spokesperson for Greensill. “In particular, this regulatory audit report did not reveal any wrongdoing by the bank. We maintain an ongoing constructive dialogue with all regulators in all of the jurisdictions in which we operate. “
The spokesperson added that all bank assets are “unequivocally” covered by insurance.
Greensill, a 44-year-old former investment banker, said the idea for his business was shaped by his experience growing on a watermelon farm in Bundaberg, where his family endured financial hardships when large companies took over. delayed payments.
Greensill Capital’s main financial product – supply chain finance – is controversial, however, as critics have said. used to hide growing corporate loans.
Even if a deal is made with Apollo, it could still wipe out shareholders like SoftBank’s Vision Fund, which paid $ 1.5 billion in the company in 2019. SoftBank’s $ 100 billion tech fund has already significantly reduced the value of its stake.
Gupta, a British industrialist who is one of Greensill’s main clients, separately saw an offer to borrow hundreds of millions of dollars from Canadian asset manager Brookfield. collapse.
Credit Suisse Executives Particularly Concerned Over Exposure Of Supply Chain Finance Funds To Gupta opaque canvas aging industrial assets, according to people familiar with the subject.
Flight reported earlier Tuesday, that Credit Suisse has bigger and broader exposure to Greensill Capital than previously known, with a loan of $ 160 million, according to two people familiar with the matter.
Additional reporting by Laurence Fletcher and Kaye Wiggins in London