European regulators press banks on Greensill and GFG Alliance exposure

European regulators have ratcheted up the pressure on Greensill Capital and Sanjeev Gupta’s GFG Alliance.

Greensill Bank AG offices in Bremen, Germany. The European Central Bank has asked lenders across Europe to detail their outstanding loans to Sanjeev Gupta’s companies and Greensill Capital. Picture: Bloomberg

European regulators have ratcheted up the pressure on Greensill Capital and Sanjeev Gupta’s GFG Alliance, asking European banks for details of their exposure to both companies amid fears Greensill’s collapse could trigger a wave of corporate insolvencies around the world.

Officials at the European Central Bank have asked lenders across Europe to detail their outstanding loans to Mr Gupta’s companies and Greensill, according to reports in The Financial Times, as Greensill edges towards a sale of its assets — except those directly related to GFG.

Mr Gupta’s metals and mining empire is seen as most at risk from the loss of financing facilities associated with Lex Greensill’s financial services companies, with the Bundaberg-born financier having financed GFG’s acquisition of a string of global assets, including bankrolling the €740m ($1.14bn) acquisition of ArcelorMittal’s struggling European steel mills by Mr Gupta’s Liberty Delta in 2019.

Greensill has also supplied ongoing funding through supply chain financing services to Mr Gupta’s Liberty Primary Metals operations in Australia. The news of increased scrutiny of his international borrowings comes as the Australian Workers’ Union held emergency talks with GFG’s Australian management, seeking assurances over the future of industrial facilities including South Australia’s Whyalla steelworks.

As concerns grow that Greensill Capital will file for insolvency, the AWU sent union delegates to Whyalla and InfraBuild plants in recent days to meet with workers who are worried over the health of the business and whether they will continue to be paid.

“We’ve been in dialogue with them over the last few days, monitoring the current situation and ensuring we’re able to get as much information and feedback from our members as possible,” AWU national secretary Daniel Walton told The Australian. “Certainly it’s clear things are quite fluid at this point in time.”

Mr Gupta is locked in talks seeking to refinance Greensill debt, and Mr Walton expects it may be weeks before any resolution is reached.

If Greensill is forced into an emergency restructure, Mr Gupta will be under pressure to hammer out a refinancing deal at even shorter notice.

“I have a sense that this is going to play out over weeks rather than days. I don’t think we’ll see a big snap like the ­Arrium administration — I suspect this will roll on for a while.”

The AWU is also sharing information with British steel union Community, which is holding meetings in the UK over concerns thousands of steel and engineering jobs could be at risk.

“We’ve been meeting with and having regular dialogue with the union in the UK to keep abreast about what they’re seeing and hearing,” Mr Walton said.

GFG Alliance executive chairman Sanjeev Gupta.

The AWU was heavily involved in the sales process that saw Mr Gupta swoop on the Whyalla plant as part of a buyout of Arrium in 2017 after it entered voluntary administration.

British union officials are scheduled to hold a Zoom meeting with Mr Gupta early this week to discuss the fate of workers with Liberty, the third-largest steel manufacturer in the country across 11 sites including Newport and Scunthorpe.

The fate of Greensill still hangs in the balance as the supply chain financier remains in talks to spin off some of its business to private equity giant Apollo at a huge discount.

However, any deal would not include Mr Gupta’s sprawling empire, leaving the industrialist scrambling to find a new provider of short-term financing.

Greensill’s main insurer cut a $4.6bn policy last week as it grew uncomfortable over its exposure, triggering Credit Suisse to wind down $US10bn of funds invested in loans arranged by the financier.

Mr Gupta is now preparing to cut back on new projects and planned expansion in Australia, company insiders say.

Private equity majors have begun circling Mr Gupta’s Australian InfraBuild business amid speculation the close relationship between Mr Gupta and Greensill could trigger a domino effect, putting even his profitable assets in play if funding lines dry up and complex financing arrangements worth billions are called in.

While no offers are believed to have been put to Mr Gupta, market sources say private equity providers have begun sharpening pitches for his profitable Australian businesses if he is unable to find new lenders for less profitable assets — including the Whyalla steelworks — and is forced into a distressed sale.

Key directors of Greensill Capital’s Australian parent company have quit recently, according to filings with the Australian Securities & Investments Commission on March 5, including chairman Maurice Thompson, former Morgan Stanley executive David Brierwood and audit committee chair Pat Allin.

Originally published as European regulators press banks on Greensill and GFG Alliance exposure