ASIC opens file after sudden Greensill collapse

The corporate cop was caught on the hop after Greensill’s collapse in March, revealing it had been in discussion with international regulators over the firm’s demise.

Greensill filed for insolvency last month after it failed to strike a deal to renew its policies with its insurers. Picture: Bloomberg

Australia’s corporate regulator has revealed it is investigating how Greensill Capital - a company once valued as high a $7bn with hopes of listing on the ASX - collapsed into insolvency last month.

In response to parliamentary questioning, the Australian Securities and Investments Commission said it was seeking a full picture of how Greensill fell into administration and how it has reverberated across Australian businesses and investors.

ASIC’s response to questions from the Parliamentary Joint Committee on Corporations and Financial Services also revealed the regulator had been in contact with European regulators and what action they are taking following the collapse of Greensill’s UK arm and German-based bank.

“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.

ASIC also said it was aware of at least eight other supply chain financiers, in addition to Greensill, with operations in Australia.

But the regulator said it was in no position to do anything about Greensill’s international operations, or those of similar supply chain financiers. It said it does not have specific data, nor does it have power to collect specific data, nor know of any specific data sources regarding the number, or scale, of operators like Greensill in Australia and overseas.

“Consequently ASIC is unable to comment on how common operations like Greensill in Australia and overseas are in any substantive manner.”

Greensill filed for insolvency last month after it failed to strike a deal to renew its policies with its insurers and Credit Suisse froze $US10bn of investment funds, which Greensill relied on for buying the debt securities it issue.

The work ASIC is doing to understand how Greensill collapsed comes on top of the regulator “working in lock-step with APRA”, to gain a greater insight around the exposure of Australian insurers to Greensill. It is also looking at financier spruiking a $US600m ($787m) pre-IPO capital raising last December which was quickly abandoned.

The unpicking of what went wrong at Greensill comes after it was revealed the financier’s founder Lex Greensill told staff three weeks before the group’s collapse that it had access to “enormous amounts of liquidity” and close to striking a new insurance policy, thanks to “our friends at Marsh and Chubb”.

But Greensill took the unusual step of suing its insurer Tokio Marine and subsidiary BCC Trade early last month when it became clear that it would not renew its policies after nine months of negotiations. Days later it filed for insolvency.

ASIC said it was “currently reviewing the circumstances and facts surrounding the recent collapse” of Greensill in the aftermath of an court battle between the supply chain financier and its insurers.

“ASIC has been, and will continue, working closely with the administrator of the Australian holding company and international regulators,” ASIC said.

The sudden collapse raised eyebrows at ASIC, which had reportedly been largely unconcerned about the operations of Greensill.

The regulator revealed ASIC chief of operations Warren Day had been in discussion with the Treasury in the wake of a report published by small business family enterprise ombudsman Kate Carnell in March last year.