Greensill collapse spreads to Denmark in mariner dispute

Greensill’s collapse is continuing to reverberate across the globe, with a Danish shipping company suing one of the financier’s American clients over non-payment.

The implosion of Lex Greensill’s Greensill Capital is being felt around the world.

Greensill’s insolvency has spread to the high seas, with a Danish mariner suing one of the collapsed financier’s clients after it failed to stump up the cash for a shipment of coal, revealing the wide ripple effect of Lex Greensill’s fallen $7bn empire.

Listed Danish shipping company, DS Norden, has launched legal action against West Virginia coal miner, Bluestone Resources, in the US District Court, alleging fraud and an “abuse of corporate form” in the failure to pay for shipment of coal.

At the same time, Bluestone, which is owned by West Virginia’s billionaire governor Jim Justice, is also suing Greensill in New York, alleging fraud.

It comes as Greensill’s creditors this week voted to liquidate the financier’s Australian operations, which has debts estimated at $4.9bn. Meanwhile, the Australian Securities and Investments Commission is investigating the company’s collapse and knock-on effect to Australian businesses, including Sanjeev Gupta’s GFG Alliance, which owns the Whyalla Steelworks and owes Greensill about $US5bn.

In the case of Bluestone, it said Greensill began demanding repayments of $US850m, two years before it was due, as the financier edged closer to collapse earlier this year.

As it was negotiating with Greensill, Bluestone was also in talks with Norden - one of Denmark’s oldest shipping companies, over the payment of a shipment of coal from America to Europe.

Greensill’s main game was the controversial practice of supply chain finance, which allowed companies to pay their suppliers more quickly if they accepted a discount on their invoices. Its collapse has now left its clients scrambling to secure refinancing to stay afloat and pay their bills.

Bluestone chartered a Norden ship in May last year to carry 60,000 tonnes of coal, at a cost of $US7000 a day, from Norfolk Lamberts Point, Virginia to Gdansk, Poland. At the end of the voyage, Bluestone owed Norden $US1.24m, which included lump sum freight and demurrage for the discharge and loading operations at Norfolk.

But troubles began when Bluestone delayed loading of the shipment after Norden’s vessel arrived in Virgina, blowing out the waiting time to load the cargo from 3.08 days to 11.82 days, increasing the amount owed.

Bluestone managed to make “partial payments” on the invoices Norden issued between July and September last year, to the point it owed the Danish company $US98,054.37. But that is where payments stopped.

On November 13 last year, Norden and Bluestone agreed to settle the outstanding balance for $US75,000. But Bluestone didn’t honour the agreement, Norden says in court documents.

And as Bluestone said it was being misled by Greensill ahead of its insolvency, Norden said it was being misled by Bluestone.

“Defendants (Bluestone) abused the corporate form in order to perpetrate a fraud, injustice, or other wrongdoing,” Norden said in its court filing.

“Defendants made repeated misrepresentations to plaintiff (Norden) that defendants intended to pay the outstanding balance of freight and demurrage due and owing to plaintiff under the charter party agreement. This includes defendants’ offer to enter into a settlement agreement in the amount of $US75,000.

“Defendants intentionally engaged in other dilatory tactics to avoid payment to plaintiff. Defendants never intended to pay or comply with the terms of the settlement.”

Norden also took aim at Bluestone registering itself in the low tax US state of Delaware, when its head office was in Virginia.

“Despite being formally registered in Delaware, BRI (Bluestone Resources) and BCSC (Bluestone Coal Sales Corporation) are operated out of a common office space at 302 S. Jefferson Street, Roanoke, Virginia.

“The Delaware addresses are “care of” the corporation trust company, and no employees or offices of Bluestone are located there.”

Norden is suing Bluestone for $US126,293.22, which includes $US98,054 in demurrage and freight, $US3238 in interest and $US25,000 in legal fees.

But it concedes the prospect of recovery is low.

“Plaintiffs’ prospects of recovery from Defendants have been seriously jeopardized by Defendants’ ailing financial position and the number and amount of other creditors’ claims against defendants’ assets,” Norden said.

“By the time plaintiff commenced the proceedings before this court, it transpired that the Bluestone group of companies... became a victim of a large-scale fraud committed by Greensill Investment (UK) Ltd, Bluestone’s long-term investment provider.

“According to defendants, the fraud resulted in a loss of assets in excess of $US200m and caused substantial other damage to Bluestone’s business, which is yet to be calculated.”

The Bluestone case against Greensill partially revealed the financier’s business practices and its relationship with its biggest client, Sanjeev Gupta’s GFG Alliance.

Bluestone said Greensill urged them to continue to do business with GFG, even when Bluestone raised concerns over delayed payment for met coal to GFG and broader queries about the credit risk of Mr Gupta’s group.

Bluestone alleged that Greensill also sought to blame it for a late payment to Credit Suisse, which Greensill owed $US140m.

“Defendants had failed to make a payment to Credit Suisse and that a payment from Bluestone was needed in order for defendants to pay Credit Suisse,” Bluestone said in its court filing against Greensill.

“While Bluestone had made each of its payments on time, and particularly made a payment to Greensill days prior, defendant Mr Hartley-Urquhart asked Bluestone to wire money to cover Greensill’s missed payment directly to Credit Suisse, so that Greensill could blame Bluestone for its own late payment.”

Bluestone said at a meeting on February 20 at White Sulphur Springs in West Virginia a Greensill representative “demanded Bluestone pay $US300m by the end of the third quarter 2021”.

This was despite Bluestone saying the court filing that amounts owed under the financing programs with Greensill “would not begin to be repaid until 2023”.

Responding to questions from members of the Parliamentary Joint Committee on Corporations and Financial Services, ASIC said last week it was working with overseas regulators over its examination of Greensill’s labyrinth of business dealings.

“A number of ASIC teams are involved in this work, examining potential conflicts of interests and accounting and audit related issues, as well as the role played by third-party entities in relation to the Greensill business,” the regulator said.

Originally published as Greensill collapse spreads to Denmark in mariner dispute