Greensill Capital faces unravelling after Credit Suisse suspends investment funds

The multi-billion dollar financial empire built by Bundaberg farmer’s son Lex Greensill is facing uncertainty, putting 7000 jobs in Australia at risk.

Lex Greensill on his Bundaberg farm. Photo Paul Beutel.

More than 7000 Australian jobs are at risk as the multi-billion dollar financial empire built by Bundaberg farmer’s son Lex Greensill faces unravelling.

Embattled financial start-up Greensill Capital plans to file for insolvency in the UK this week, as it simultaneously moves toward a deal to sell its operating business to Apollo Global Management, according to people familiar with the matter, The Wall Street Journal reported on Thursday.

Also, in a dramatic ratcheting up of Greensill’s problems, Germany’s top financial regulator BaFin referred matters related to the firm’s banking unit, Greensill Bank, to criminal prosecutors, according to a spokesman for the Bremen prosecutors office.

It comes as lawyers for Greensill warned the NSW Supreme Court this week that “over 7000” Australian jobs were at risk if it did not intervene to force insurers to extend coverage amid a crisis engulfing the company.

Lawyers for the financier told the NSW Supreme Court the loss of $US4.6bn ($5.9bn) worth of credit insurance, which expired on Monday, could cause a wave of insolvencies that could put many Greensill clients under, risking more than 50,000 jobs across the world including 7000 in Australia.

“If the policies are not renewed, Greensill Bank will be unable to provide further funding for working capital of Greensill’s clients. In the absence of that funding, some of Greensill’s clients are likely to become insolvent, defaulting on their existing facilities,” court documents say.

Steel magnate Sanjeev Gupta’s global metals and mining empire is highly exposed to Greensill Capital. Greensill is one of the biggest financiers to Mr Gupta’s GFG Alliance which owns a swathe of Australian manufacturing, mining and energy assets including the Whyalla steelworks.

London-based Greensill Capital, founded by Mr Greensill a decade ago, has appointed Grant Thornton to look at restructuring options as it faces the possibility of filing for insolvency, according to people familiar with the company. The financial strife came after Credit Suisse Group suspended $10bn of investment funds.

The potential insolvency of Greensill Capital, which offers finance that allows businesses to extend the time they have to pay bills, would end an ambitious run for Mr Greensill, whose views of capitalism were forged growing up on a melon and cane farm where his parents often waited years to be paid.

The family still has large farming operations around Bundaberg with their Greensill Farming Group cultivating more than 3000ha of sweet potatoes, cane, water melons and other crops across four properties.

Lex Greensill’s focus shifted from the land to international finance when he saw the financial hardships his parents experienced on their farm.

As a youth, he worked with the local fruit and vegetable association to establish a more prompt payment system for farmers, establishing the genesis of his later business venture.

Australian billionaire Lex Greensill, of Greensill Capital, in London. Picture: Annabel Moeller

Mr Greensill, 44, graduated from Kepnock State High School in the city’s western outskirts before doing a law degree by correspondence through the Queensland University of Technology. After working as an article clerk at a local law firm, he moved to Sydney in his early 20s where he worked for number of startups — one of them being Fifth Finger, one of the pioneers for the technology behind text messaging.

Mr Greensill met his future wife Vicky, a doctor, at Bundaberg Hospital, after which he moved to London.

The father of two went on to work as Morgan Stanley and Citibank before becoming an advisor to then-British Prime Minister David Cameron working on small businesses credit.

“I had big dreams and I’m obviously thrilled but I would be lying if I said this was what I expected,” Mr Greensill told the Bundaberg News-Mail in 2019.

“I had an ambition that’s shared with my brothers, we’re all partners together, to make a difference and I guess we have in that way been able to grow something that makes a difference to hundreds of thousands of people.”

Asked about what advice he would give to young people, Mr Greensill said: “Getting ahead is about determination, hard work and passion. Yes, it’ll be hard, but at a young age, you’ve got so little to lose, so take a chance. Now is the time to have a vision and run with it.”

Greensill, which provides $143b of financing to more than 10m customers worldwide, is backed by Masayoshi Son’s SoftBank Group, which invested $1.46bn in the company in 2019.

The Greensill’s ultimate holding company is Greensill Capital Pty Ltd, which lists its main address as Qunaba, a farming area that includes Bundaberg’s only hill called the “Hummock.” Greensill Capital Pty Ltd increased its revenue to $476m in 2019 from $270m the previous year, but profit fell from $74m to $65m as it made heavy investments in new areas including employment compensation and almost tripled staff to 618.

Greensill acquired two businesses in 2019 - US-based Finacity, which specialises in receivables securtisation, and UK-based Earnd, which developed technology allowing workers to receive early payment for earned but unpaid wages.

Greensill said Tuesday that it acknowledged the decision by Credit Suisse to “temporarily gate” supply chain finance funds dealing in Greensill-sourced assets.

Peter, Lex and Andrew Greensill.

“We remain in advanced talks with potential outside investors in our company and hope to be able to update further on that process imminently,” a company spokesperson said.

Mr Greensill has become a well-known figure in British financial circles and was made a Commander of the British Empire in 2017 for services to the economy.

Greensill Farms, which is run by Lex’s brothers Peter and Andrew, is a big employer in Bundaberg with a staff of almost 100 exporting produce throughout the Asia-Pacific region as well as supplying to major supermarket chains.

According to a Australian Securities and Investments Commission (ASIC) filing, Lex, Peter and Andrew are joint shareholders in Greensill Farms, which along with its agricultural operations also runs an earthworks and development business. The farn was established by Lex’s grandfather Roy in 1947 and inherited by his father, Lloyd.

The brothers are now regular entrants in The Australian’s list of the 250 richest people in the country with an estimated combined wealth of $2.13 billion in 2020.

Lex Greensill’s UK home is an old vicarage in the rural village of Saughall in Cheshire West and Cheshire, about 300 km north west of London.

In 2019, he applied to the Saughall and Shotwick Park Parish Council to purchase rural land in the area to establish a wildlife haven, noting the threat to the environment from “climate change, wildlife decline and loss of natural habitat.”

“I had the privilege of growing up in a rural community and my brothers and I enjoyed the freedom to explore and learn about the natural world around us, something that we took for granted in our youth,” Mr Greensill told the local community.

Despite being based in the UK, Mr Greensill remains close to his Bundaberg roots. In 2019, he splashed out $4.1 million to buy “The Glass House,’’ a three-level beachfront spread near Bundaberg.