Greensill debt claims balloon to $5bn

The Greensill family has emerged as a creditor to the collapsed global financier headed by former Bundaberg farmer Lex Greensill.

Lex Greensill, the founder of Greensill Capital.

The liquidators of Greensill Capital say they need more time to investigate the labyrinth internal dealings within the financial services firm to determine the status of dubious transactions within the group.

Liquidators Grant Thornton released their second report to creditors late on Thursday, saying the Australian parent company of Bundaberg entrepreneur Lex Greensill’s collapsed financial empire had received formal debt claims for $4.9bn after German banking regulators lodged a claim for €2.1bn ($3.4bn) on behalf of customers of Greensill’s German bank.

The report says the Association of German Banks has already returned €1.9bn in deposits to customers of the bank, with further payments under way. It also confirmed a claim from Peter Greensill Family trust for $78.3m.

While Grant Thornton did not find any reason to believe Greensill Capital directors allowed the company to trade while insolvent ahead of the March 8 decision to call in administrators, they noted a final call on that would need to wait until their UK counterparts finished sorting through the accounts of its operating arm to determine when it had become insolvent.

“We note that on a stand-alone basis, that is, without the ongoing and unconditional ­financial support provided by Greensill Capital UK, the company was insolvent from both a balance sheet and cashflow perspective at all material times in the lead-up to our appointment,” the report says.

“However, from our investigations it is apparent that financial support was provided by GCUK on an ongoing and unconditional basis in order to allow the company to meet its obligations.”

But Grant Thornton said there was still reason to believe Green­sill Capital’s internal affairs warranted further investigation into whether payments made by its Australian head office to its operating subsidiaries elsewhere in the group were properly made.

Its investigation is still focused on whether loans taken on by Greensill’s Australian head company should have been passed straight through to its sub­sidiaries.

The Australian company’s main asset is a debt of $US777.4m ($1bn) owed by GCUK. When Grant Thornton took control of Greensill’s Australian head office, the directors report showed that debt as being worth $US337.4m – about $US440m less than intercompany books indicated it was worth.

Grant Thornton said its investigation found no “sound basis” for the $US440m discount on the loan, and had lodged a claim for the full amount with their UK counterparts.

But the liquidators said they were still sorting through other transactions, particularly those relating to loans made to the Australian arm through convertible loan notes – which should convert to equity but didn’t – and where the cash was passed straight through to the UK and Greensill’s German bank.

Those decisions meant Greensill Capital’s Australian holding company retained the debt and needed cash from its UK business to keep paying it off, which Grant Thornton says may mean the transactions are “uncommercial”.

“Given the current financial position of the recipients of funding provided by the company, namely Greensill Bank AG and GCUK, which are both insolvent, we have not yet formed a concluded view on the recoverability of any transactions involving these related entities should those transactions ultimately be considered to be uncommercial,” the report says.

In its first creditor’s report, Grant Thornton said it was investigating several payments made by Greensill Capital to related parties, including substantial cash transfers to a family trust associated with Lex Greensill’s brother, Peter.

In its latest report, the liquidators said those cash payments, worth about $US174m, appeared to be the result of a share purchase agreement with Japan’s SoftBank, a major Greensill backer, and were made to a group of 11 shareholders.

“From our investigations, it was apparent that the payments recorded with narrations referencing the PG Family Trust were part of several payments made to 11 shareholders (the sellers) as part of a share purchase agreement entered into with SoftBank,” the report said.

“From our review of the company’s records and enquiries to date, it appears the company acted as an agent only in relation to the sale of the company’s shares, and that the company’s bank account was used to hold third-party funds on a temporary basis only, representing funds flowing between the shareholders in respect to the transfer of shares.

“Although the funds were paid into the company’s bank account, they were not company funds, and were always intended to pass through to the third-party beneficiary of the funds who had sold their shares.”

Grant Thornton said it expected to be able to pay out the full entitlements of Greensill’s former Australian staff, collectively owed about $2.3m, within the next few months.

But the report warned that any return to unsecured creditors, including payments to trade creditors, would need to wait on the outcome of the liquidation of Greensill’s UK and German operations.

Originally published as Greensill debt claims balloon to $5bn