Greensill Capital is preparing to file for insolvency in the UK, capping a dramatic dismantling for the finance company backed by SoftBank and advised by former Prime Minister David Cameron.
The planned filing comes as U.S. private equity firm Apollo Global Management rushes to strike a deal to buy the most attractive parts of Greensill, one of the world’s largest providers of supply chain finance, according to people familiar with the matter.
A deal with Apollo would likely wipe out Greensill shareholders such as SoftBank’s Vision Fund. The Japanese conglomerate’s $ 100 billion tech fund paid $ 1.5 billion in the company in 2019, but has already significantly reduced the value of its stake.
Lawyers for Greensill warned this week that the recent loss of a $ 4.6 billion insurance contract could lead to a wave of defaults among its customers and 50,000 job cuts. He said some of those customers were “at risk of becoming insolvent, in default on their existing facilities” because their funding for working capital had been cut.
Founded by former banker Lex Greensill ten years ago, the company has grown into a major player in supply chain finance, helping businesses raise money from their customer and supplier invoices. However, its main financial product is controversial, as the reviews have said, it can be used for disguise corporate loans.
The Apollo deal, if agreed, would effectively save those customers who would be stranded by Greensill’s disappearance.
Greensill and Apollo declined to comment.
The $ 455 billion U.S. investment group and its insurance subsidiaries, including Athene, could underwrite several of these supply chain finance deals with blue-chip companies, potentially worth several. billion dollars, according to two people with knowledge of the subject.
When nervous lenders take these facilities away from heavily indebted companies, it can create a bank-managed effect on their working capital position. This sort of tangle was at the heart of the 2018 collapse of UK entrepreneur Carillion, which drew heavily on a government supply chain finance scheme.
Apollo bailout deal set to exclude finance lines tied to metals mogul Sanjeev Gupta, however, the British industrialist whose companies have borrowed heavily from Greensill in recent years.
A spokesperson for the Gupta GFG Alliance says the FT Tuesday that the group “has adequate financing for its current needs and that its refinancing plans to broaden its capital base and obtain longer-term financing are progressing well.”
Apollo and its affiliated groups could part ways with Greensill’s operations and hire hundreds of employees, the people said. However, they cautioned it had not been finalized and details could change.
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 Greensill, where the company seeks relief from insolvency laws.
Greensill owns a banking subsidiary in Germany, which the Financial Times revealed on Tuesday had come under the control of financial watchdog BaFin.
A 44-year-old Australian banker, Greensill solidified his status as a paper billionaire when SoftBank’s Vision Fund invested in his company in 2019. The year after founding his eponymous company in 2011, he acted as an advisor to the Prime Minister at the time, Cameron and helped set up the government’s supply chain finance program.
MPs investigating the Carillion collapse said the plan allowed him to “Support its failing business model“.