United Kingdom

Lender advised by David Cameron Greensill Capital on brink of collapse

A controversial lender advised by former Prime Minister David Cameron is fighting for survival after major backers walked away.

Although Greensill Capital was founded by Australian Lex Greensill and is based in the small Queensland town of Bundaberg, its woes will reverberate in the UK where it has major operations.

The company’s demise is a serious embarrassment for Cameron who was hired as an adviser in 2018 and who regularly promotes the lender, which operates in the world of supply chain finance.

Greensill Capital's demise is a major embarrassment for Cameron (pictured) who was hired as an adviser in 2018 and who regularly promotes the lender

The crisis poses a threat to the British steel industry and the empire of Indian-born businessman Sanjeev Gupta, who relies heavily on Greensill for funding.

Gupta owns much of what remains of the UK industry through Liberty Steel, part of his GFG Alliance.

Problems for Greensill mounted yesterday when Swiss asset manager GAM said it would wind down a £600m fund they run together.

The move came just a day after another long-term ally, Credit Suisse, froze £7billion of funds that invest in deals arranged by Greensill. It is now in talks with US private equity giant Apollo Global Management to arrange a rescue deal.

To add to the company’s problems the British Business Bank this week stripped it of a Government guarantee on its emergency loans to Gupta under the Coronavirus Large Business Interruption Loan scheme.

The guarantees meant the taxpayer would have picked up 80 per cent of losses on these loans. But if Gupta fails to repay them, the burden will now fall on Greensill.

Regulators in Germany are also on edge. The country’s financial watchdog, Bafin, has appointed a special representative to oversee the day-to-day operations at Greensill Bank, which is part of the larger group and has lent heavily to Gupta.

Former investment banker Greensill, 44, set up his firm in 2011 after seeing his parents struggle to make ends meet while waiting for their crops to grow on their farm in Australia.

It operates in the hard and high-risk world of supply chain finance, lending to businesses to pay suppliers. Initially, it appeared hugely successful and hired Cameron as a paid adviser two years after he left Downing Street.

Former investment banker: Lex Greensill set up his firm in 2011 after seeing his parents struggle to make ends meet while waiting for their crops to grow on their farm in Australia

Soon after, in 2019, Japanese giant Softbank poured more than £1billion into the firm.

At one stage the business appeared to be heading for a valuation of £5billion but Softbank also appears to be losing confidence, and is said to be preparing to write down the value of its stake to close to zero. 

It is quite a change in fortunes for the entrepreneur, who became a paper billionaire following Softbank’s investment.

GAM said yesterday’s decision to close the fund came ‘as a result of recent market developments and resulting media coverage related to supply chain finance’.

Credit Suisse decided to suspend its supply-chain finance funds due to ‘considerable uncertainties’ around their valuation.

Apollo is now understood to be looking to cherry-pick some of Greensill’s best assets. It is thought the parts that Apollo is interested in could fetch just £70million.

A spokesman said: ‘Greensill confirms that it has entered a period of exclusivity with a leading global financial institution with a view to concluding a transaction with them this week.

‘The transaction is expected to include large parts of Greensill’s business and its assets under management.

‘While the structure of the new business is still being determined, we expect the transaction will ensure the majority of Greensill clients will continue to be funded in the same way as they currently are while also preserving a substantial number of jobs.’

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