Greensill clan bails out US operations as Sanjeev Gupta readies defence on $US5bn debt

Family trust injects $US2m into Greensill’s US operations to help pay employee entitlements and other costs, but there’s no money so far for Australian workers.

Lex Greensill on the family’s Qunaba farm. Photo: Paul Beutel.

The Greensill family is bailing out its bankrupt US operations, injecting $US2m ($2.6m) into its American arm to payout employee entitlements and general unsecured claims.

Greensill’s US business has Greensill’s US business has filed for chapter 11 bankruptcy, which allows the Greensill to keep running its operations rather than fall into administration, as the financier’s collapse reverberates from Bundaberg to London to Germany and now New York.

At the same time, Greensill doesn’t have enough money to pay $2m – $3m to its 35 Australian staff made redundant, with its Australian operations facing creditor claims of up to $4.8bn.

Meanwhile, Greensill’s biggest debtor, British industrialist Sanjeev Gupta said his GFG Alliance was “readying a defence” if negotiations for a standstill on a $5bn debt to Greensill fail, and has confirmed its financing with Greensill involved advancing payments on future sales GFG “may make”.

As part of the bankruptcy filing, Peter Greensill Family Trust has “loaned” the US business $US2m to provide “critical and necessary financing” under a debtor in possession (DIP) facility.

“I believe based on the information provided to me that the DIP Facility will allow the Debtor to meet ordinary course expenses, accrued but unpaid payroll for the Terminated Employees … and the costs of administering this chapter 11 case through the sale and plan processes,” Greensill’s US head of restructuring, Matthew Tocks, said according to court documents.

The cash from the Greensill family comes as it continues a multimillion-dollar renovation on the home of Peter Greensill — the younger brother of Greensill Capital’s founder Lex Greensill — at Bargara, east of Bundaberg.

Peter Greensill (left) and brother Lex in 2019. Picture: Hollie Adams

Peter Greensill, who runs the family’s substantial Bundaberg-based agricultural operations, is installing expensive blackwood timber ceilings and roofing imported from Germany as part of the renovation of the home that has stunning ocean views.

Mr Tocks said Greensill US arm is in the process of engaging an investment banker to sell the American operations, which has buckled under debts worth up to $US100m and has assets valued up to $US50m.

He said the $US2m in funding from the Greensill family, combined with the appointment of an investment banker will “maximise the value of its key asset and make distributions to allowed general unsecured and priority claims”.

The bankruptcy filing states that it has up to 99 creditors. Unsecured claims ranging from $US23,692 to $US43,260, have already been submitted by its 20 biggest creditors, 13 of whom have gmail email addresses listed as their primary contact.

Greensill collapsed 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 as buyers of the debt securities it issued — while its biggest debtor Sanjeev Gupta’s GFG Alliance has withheld $US5bn in payments owed to Greensill.

Mr Tock said Greensill “experienced severe financial distress” in “early 2021”, which also included “pressure on and from key investors of the company to reduce the company’s exposure to the GFG Alliance”.

Greensill’s UK and Australian arms are now in administration, under separate processes managed by Grant Thornton’s British and Australian offices.

Its UK business is negotiating with Mr Gupta on a potential standstill on the money he owes Greensill. Mr Gupta said he was confident he would be able to strike a pause on the payments owned with Greensill administrators Grant Thornton.

But if talks fail, he said he had a back-up plan.

“A more important point to make is we do have also a defence, which we are readying because we had committed facilities for three years so you know if there‘s any reason there is any dispute with the Greensill auditors or its or its administrators we will we have our defence ready,” Mr Gupta said.

“And we’ll use it but I’m quite hopeful that we won’t need to, and then once that is in place, once a standstill is in place, we will negotiate long-term refinancing.”

In a podcast to GFG employees, Mr Gupta has given a glimpse to Greensill’s risky business model. Mr Gupta said Greensill was a “breath of fresh air” when it signed on GFG, which had not been able to access traditional sources of financing.

Greensill’s financing to GFG involved advancing GFG payments on future sales that it may or may not make.

“When I started my journey in 2013 there were few options available in terms of traditional finance to support our vision and our journey ahead. Greensill came as a breath of fresh air because they believed in our vision and model. They had innovative ways of raising finance and supported us all the way through,” Mr Gupta said.

“In a mature industry what you would do is go to the capital markets and get either a bond, which would be payable in five years, seven years, 10 years and you would service that.

Global GFG Alliance chief executive Sanjeev Gupta says his company owes Greensill ‘many, many’ billions. Picture: John Feder

“Since that formal funding wasn’t previously available to us, Greensill was able to provide us long-term funding but using our future cash flows. So basically, any future sales that we will make, may make, and then discounting that cash flow and giving us that as an advance.”

Mr Gupta declined to reveal how much he owed Greensill but confirmed it was “in many, many billions”.

He said as his business, which included the Whyalla steelworks, matured he began diversifying to financiers other than Greensill.

“It was a clear objective for GFG for sometime now to move away or diversify from Greensill. Some successes we have already had, a very good example is Australian business Infrabuild, which was originally financed by Greensill. We had it refinanced by a public bond.

“But unfortunately Greensill collapsed and this is something that has definitely been a great challenge and we are managing the situation. We have luckily a very good dialogue with Greensill’s administrators Grant Thornton, who realise the importance of these business and the importance of these businesses staying stable, even for their creditors point of view in terms of getting them recovery.

“We are managing in the meantime our cash extremely carefully. I am personally monitoring the different initiatives at each plant in terms of conserving cash and optimising our operation.”