Greensill Capital struggles spell trouble for Whyalla steelworks

The fate of a Bundaberg-born banking giant is in the balance, endangering an empire including SA’s Whyalla steelworks.

Sanjeev Gupta, executive chairman of GFG Alliance, meets workers at Whyalla’s Arrium steelworks after his successful purchase bid. Picture: Bianca De Marchi

The fate of a Bundaberg-born banking giant is in the balance, endangering an industrial empire including South Australia’s Whyalla steelworks as an international financial storm threatens to break.

Greensill Capital, the supply-chain financier founded by Bundaberg’s Lex Greensill, has for years been the main financier to Sanjeev Gupta, who made his name in Australia rescuing Whyalla from administration as part of a rapid fire $15bn international acquisition spree.

Mr Greensill and Mr Gupta have both pursued globe-trotting dreams, but those dreams come with big risk and events this week have left the high-flying Mr Greensill facing collapse, sparking concern that his biggest customer, Mr Gupta, may also face serious financial fallout.

Events playing out in Sydney, London and Germany may determine the fate of thousands of steelworkers in Whyalla, who know little of the tangled web of financial transactions that will save or doom Mr Gupta’s GFG Alliance, which bought Arrium’s failed mining and steel businesses, including the Whyalla steelworks.

Lawyers for Greensill have told the NSW Supreme Court the loss of $US4.6bn ($5.90bn) worth of credit insurance, which expired on Monday, could cause a wave of insolvencies pulling many Greensill clients under and risking more than 50,000 jobs across the world, including 7000 workers in Australia.

New court documents, seen by The Australian, show Greensill Capital’s increasing desperation as it tried to force an extension of its key insurance policies, the loss of which triggered this week’s crisis.

Lawyers for Mr Greensill pleaded to force the extension of the policies, arguing that their loss would trigger a chain of events that could lead to the insolvency of its clients — including a “major global resources group with significant operations based in Australia”, understood to be Mr Gupta’s GFG Alliance.

Lex Greensill. Picture: Annabel Moeller

It represents the latest blow for the Bundaberg financier who is poised to file for insolvency in Britain, after a move by investment bank Credit Suisse to suspend $US10bn of funds invested in loans arranged by the financier.

Despite the dire warnings of the loss of the insurance policies, on Wednesday Greensill Capital withdrew its legal bid to force an extension of the policies, raising questions about the group’s next move.

Mr Greensill grew up on a sugar cane farm in Queensland and saw the difficulties of delayed supplier payments for his family, prompting him to set up Greensill Capital to supply a form of a loan so a company could receive immediate payment.

Concern over the risks attached to those Greensill loans has rapidly spread through the international financial system.

German banking regulators BaFin filed a criminal complaint in Bremen on Wednesday against his banking operation, Greensill Bank AG, alleging suspected balance sheet manipulation in accounting of Gupta companies.

Greensill’s move to insolvency may still smooth a path for its survival, with private equity giant Apollo Global Management in talks to buy out less risky parts of the business for $US100m compared with a multi-billion-dollar valuation. Should that proceed, backers of Greensill including former British prime minister David Cameron stand to lose the bulk of their investments.

Any deal would not include Mr Gupta’s empire, leaving the industrialist scrambling to find a provider of short-term financing. Mr Gupta’s British bank, Wyelands, announced on Wednesday it would repay retail depositors in full as concerns over his empire escalate following a rare intervention by the Bank of England.