Thousands could lose jobs: Greensill tells court

An explosive affidavit filed in a NSW court reveals the extent of the damage across the economy if financing group Greensill collapses.

Lex Greensill of Greensill Capital in London. Picture By Annabel Moeller

Greensill Capital and its insurers were at loggerheads for months, with the two sides lobbing legal barbs from September last year before things came to a head in recent days, court documents show.

Under pressure investment bank Greensill warned it would be unable to provide further funding for its clients if were unable to secure a win in the courts against its insurers, including Credit Suisse and IAL, potentially putting 50,000 jobs at risk, including 7000 in Australia.

The clients currently insured under the policies include “a major global resources group with significant operations based in Australia”.

The comments were made in an court filings released for the first time by the Supreme Court of NSW late on Thursday that were prepared by Greensill’s lawyers for an injunction hearing that took place earlier this week aimed at trying to prevent insurers from withdrawing their cover. On Wednesday Greensill withdrew its legal bid to force an extension of the policies.

Court documents reveal Greensill’s “economic viability would immediately and seriously be impaired” if it is unable to regain insurance.

The pressured Greensill is seeking its insurers to reverse their decision from June last year to decline insurance the Greensill products, warning that brokers Marsh “must have known” underwriting would not be given.

Greensill, founded and headed by Bundaberg-born farmer Lex Greensill, noted it had sought to avoid the collapse of the business, dealing with its insurance brokers Marsh for over six months to seek out alternative insurers but no agreement on acceptable terms had been reached.

“If the policies are not renewed, Greensill Bank will be unable to provide further funding for working capital of Greensill’s clients,” the Greensill application said.

“In the absence of that funding, some of Greensill’s clients are likely to become insolvent,

defaulting on their existing facilities. That, in turn, may trigger further adverse consequences on third parties, including the employees of Greensill’s clients”.

Court documents reveal Greensill complained it was not given “at least 180 days” warning prior to the end of the policy that underwriting would not be renewed and is demanding the insurers to “provide renewal terms”.

“On either clause, the 1 September Letter did not take effect until 3 September 2020 (Sydney time), either at the beginning of that day or at 5:28pm that day,” the documents said.

“That was after the date which was 180 days prior to end of the Policy Period, being 2 September 2020.”

“There is no suggestion that IAL, the principal, ever notified Greensill that BCC ceased to be its representative under those contracts.”

Court documents also reveal Greensill had been seeking renewal of policies for some time, writing to BCC, Insurance Australia Group and Tokio Marine Australasia on 27 February request urgent renewal of coverage.

“Greensill has been requesting renewal terms for some time now which, in breach of clauses 4.2 of the Policies, have not been provided. We now reiterate these requests with the utmost urgency,” an affidavit said.

The documents reveal Greensill’s working capital facilities involved total some $US4.6bn to approximately 40 different Greensill clients. It also revealed the business had $500m in net assets in Australia.

Court documents warned defaults by clients due to a withdrawal of the insurance would trigger a wave of insolvencies.

“Greensill considers that defaults by clients under the facilities insured … would materially impact Greensill’s ability to raise further funding in the capital markets,” the documents said.

“If Greensill is unable to continue to provide financing under its uninsured facilities it is likely that the ability of Greensill’s other clients to repay the facilities would be impacted.”

“Greensill expects that this would lead to yet further defaults under the facilities.”