Greensill collapse sends shockwaves through economy

A specialist lender advised by David Cameron has crashed into administration.

Lawyers for Greensill Capital, set up in 2011 by Australian Lex Greensill, told the High Court in London it was in ‘severe financial distress’ and had ‘no conceivable way’ of meeting a £101million repayment demand from bank backer Credit Suisse.

The demise of the firm – which specialises in supply chain finance – will send shockwaves through the British economy and put thousands of jobs in the steel industry at risk.

The collapse is a humiliation for Greensill, 44, whose popularity with government officials landed him a CBE in the 2017 Queen’s Birthday Honours List (pictured at the ceremony with his mother Judy).

Greensill is the biggest lender to the business empire of Sanjeev Gupta, who was dubbed the ‘saviour of UK steel’ after buying up swathes of the industry but now faces a funding crisis.

It also lends to major corporations including Astrazeneca and Vodafone and around 1,000 pharmacies use the firm to borrow money to fund the cost of medicines. Furthermore, the lender owns a business called Earnd, which allows NHS workers to get parts of their salary ahead of payday.

US private equity firm Apollo Global Management was last night picking over Greensill’s carcass as it seeks to buy the best parts of the group.

But it has offered just £43million for the assets it wants – a far cry from the £5billion value Greensill had recently been targeting in a potential stock market listing.

Apollo will retain ‘the majority’ of the company’s 595 UK employees if a deal is done, according to court documents seen by the Financial Times.

A spokesman for Grant Thornton, the administrator, said it was in ‘continued discussion with an interested party in relation to the purchase of certain Greensill Capital assets’. 

The deal will likely wipe out shareholders, including Japanese investment giant Softbank which had ploughed £1billion into the firm in 2019. 

The collapse is a humiliation for Greensill, 44, whose popularity with government officials landed him a CBE in the 2017 Queen’s Birthday Honours List. 

‘He said it was ‘the graduation that my mother was never able to go to, at Buckingham Palace’.

Both Greensill and Gupta were plunged into crisis last week when the lender’s main insurer refused to renew key cover. 

This meant that rather than being insured if its borrowers failed to repay, Greensill would have to bear the brunt of any losses.

3,000 steel jobs at risk as Gupta defaults 

 By FRANCESCA WASHTELL 

Five thousand UK steel and manufacturing jobs were on the line last night after the main lender to Sanjeev Gupta’s empire plunged into administration.

Specialist finance house Greensill Capital was the biggest backer of the steel magnate’s collection of companies, the GFG Alliance. This group includes Liberty Steel, which employs 3,000 people at 11 steel plants in Britain.

On the line: Sanjeev Gupta bought the Aldwarke steel plant, Rotherham (pictured)

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Another 2,000 GFG staff in the UK work at manufacturing sites. Gupta also owns Scotland’s only aluminium smelter.

Court documents filed by Greensill yesterday included a letter sent by GFG in February that warned it would collapse into insolvency if Greensill went under and stopped providing it with money.

Greensill had about £3.6billion of exposure to GFG, the papers showed. The lender also said GFG had already started to default on its payments.

Gupta, a 50-year-old Indian born British tycoon, was dubbed the ‘saviour of UK steel’ after a spending spree that saw him buy up plants in Rotherham, Stocksbridge in South Yorkshire, Newport and Hartlepool.

When Greensill began running into difficulties a couple of weeks ago, Gupta is understood to have tried unsuccessfully to seek loans from other lenders.

Unions and politicians were last night desperate to find out from him what Greensill’s implosion will mean for GFG’s factories in the UK and thousands of workers. The chief executive of Liberty Steel, Jon Ferriman, held talks with business secretary Kwasi Kwarteng on Sunday.

But nationalising the steel sites was not part of the contingency plans discussed.

Unions are due to speak to Gupta today and have been growing increasingly frustrated with the lack of transparency around the funding crisis. 

A representative from steel union Community said: ‘Sanjeev Gupta needs to tell us exactly what the administration means for Liberty’s UK businesses and how he plans to protect jobs.

Gupta has not spoken publicly since it was first reported more than a week ago that Greensill was in trouble.

But there are growing expectations that Gupta will launch a fire sale of GFG’s assets, with potential buyers already lining up to pick off parts of the group.

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Credit Suisse, one of Greensill’s major backers, took fright. It froze £7billion of funds, leaving the lender short of cash.

This had an impact on Gupta’s GFG Alliance, which effectively borrows money from Greensill to pay its suppliers, and then pays Greensill back when it has more cash. Without the money flowing in from Greensill, GFG itself was left struggling to pay suppliers.

In a sign of the dire straits Gupta’s businesses are in, the steel tycoon last week told senior staff that he would stop repayments to Greensill in an effort to hold on to more cash.

The heavy lending to GFG by Greensill had already raised eyebrows at Germany’s financial regulator, BaFin. It intervened last week to halt operations at Greensill’s German subsidiary.

But regulators in the UK are now likely to face questions.

Greensill is not directly regulated by the Financial Conduct Authority (FCA). Instead, it pays ACA Mirabella, which is authorised by the FCA, to supervise it and make sure it stays within City rules. 

The FCA is understood to have been in contact with Greensill leading up to its collapse, but a spokesman refused to reveal when talks began.