Ailing UK finance company Greensill is said to be on the verge of bankruptcy – a move that would send shock waves through the industry, trapping customers and risking up to 50,000 jobs globally.
Greensill specializes in short-term supply chain finance to provide capital to businesses around the world, but now faces growing questions regarding its opaque and complex accounting practices.
The London-based finance company, founded in 2011 by Australian Lex Greensill with operations spanning Australia and the United States, is set to file for bankruptcy according to the Financial Time and Bloomberg News.
However, an industry source told AFP that private equity firm Apollo Global Management Fund and its partner Athene are close to closing a bailout deal that could provide $ 100 million in new funding.
The company was plunged into another slump on Monday when lender Credit Suisse suspended $ 10 billion in funds after discovering that $ 4.6 billion in insurance underlying Greensill contracts had expired.
Credit Suisse blamed “considerable uncertainty” over the overvaluation of assets – and on Friday it began liquidating some funds to redistribute cash to investors.
Swiss asset manager GAM has severed ties with Greensill.
In another blow, the German financial watchdog on Wednesday froze the operations of the German banking subsidiary of Greensill, citing an “imminent risk” of debt distress.
The Bremen prosecutor’s office told AFP that it had opened a preliminary investigation.
German media reported that regulator Bafin had filed a criminal complaint against Greensill Bank over allegations that it falsified balance sheets.
Bafin froze inbound and outbound payments from Greensill Bank on Wednesday, essentially shutting it down.
He also expressed concern about accounting irregularities, including relations with the GFG Alliance group headed by Indo-British billionaire Sanjeev Gupta.
“During a special forensic audit, Bafin discovered that Greensill Bank AG was unable to provide evidence of the existence of receivables on its balance sheet which it had purchased from the GFG Alliance group”, Bafin said.
A collapse of the Greensill Bank would also have serious consequences for the investments of local communities.
For example, the German city of Monheim am Rhein could potentially lose 38 million euros or 1000 euros per capita.
The bank – whose total assets stood at 4.5 billion euros at the end of 2020 – describes itself as a refinancing institution of its parent group.
The worsening of the Greensill crisis dates back to March 1 when the Australian Supreme Court of New South Wales dismissed its lawsuit against insurer Tokio Marine, which had withdrawn cover from the $ 4.6 billion in loans granted to customers of Greensill.
Greensill’s attorney, in one filing, warned of “catastrophic” consequences if coverage was not renewed.
The group would be unable to finance clients “likely” to become insolvent.
As a result, more than 50,000 jobs, including more than 7,000 in Australia, could be threatened both in the group and in its customers, warned the lawyer.
Greensill and Tokio Marine did not respond to AFP requests for comment.
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