Greensill collapse spreads to US, with chapter 11 bankruptcy filing

Greensill Capital’s US arm has filed for bankruptcy as it buckles under debts of up to $130m.

Lex Greenshill of Greensill Capital. Picture: Annabel Moeller

Greensill Capital’s collapse has spread to the US, with its American arm filing for bankruptcy in New York as it buckles under debts worth up to $US100m ($131.4m)

Greensill Capital Inc filed for Chapter 11 bankruptcy in the Southern District of New York on Thursday night, three weeks after the financiers UK and Australian operations dived into administration.

Its German-based Greensill Bank has also been declared insolvent, with the Association of German Bankers submitting a contingency claim worth up to €2bn ($3bn) against Greensill Australia, as Lex Greensill’s $7bn empire implodes.

Greensill’s US operations is 100 per cent owned by Greensill Capital UK — which is currently being run by administrators from Grant Thornton — with assets valued up to $US50m, according to court documents.

The bankruptcy filing, Greensill US’s board states that Greensill Capital UK “provides for funding and reimbursement of the corporation’s costs in connection with its continued employment of certain” employees.

Mr Greensill, who has been spending most of his time bunkered down in the UK, met with fellow Greensill US board member Jill Frizzley on Wednesday and Thursday this week, where on advice from management and lawyers filing for bankruptcy was considered the only option.

“After review and due consideration of all of the information presented to the board, the board deems it advisable and in the best interests of the corporation, creditors, stakeholders, and other interested parties, for the corporation to commence the bankruptcy case by filing a voluntary petition for relief under chapter 11 of the bankruptcy code,” the filing states.

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.

Other creditors have listed msn and yahoo email addresses as their primary contact.

A chapter 11 bankruptcy generally allows a debtor to propose a plan of reorganisation to keep its business alive and pay creditors over time.

The bankruptcy filing comes after US coal miner Bluestone, owned by West Virginia’s billionaire governor Jim Justice, sued Greensill UK, Mr Greensill and former US executive Roland Hartley-Urquhart, alleging fraud.

That case, also filed in the Southern District of New York, provides a glimpse into the months leading into Greensill’s collapse, with Bluestone alleging that Greensill sought to blame it for a late payment to Credit Suisse, which Greensill owed $US140m.

Bluestone said: “Throughout the relationship between the parties, defendants engaged in conduct that exceeded the traditional role of a lender, and exerted control over Bluestone”.

This included Bluestone alleging that Greensill sought to blame it for a late payment to Credit Suisse, which Greensill owed $US140m.

“Defendants had failed to make a payment to Credit Suisse and that a payment from Bluestone was needed in order for defendants to pay Credit Suisse,” Bluestone added in its court filing.

The miner said Greensill “engaged in a fraudulent scheme to pressure Plaintiffs to alter their longstanding commercial relationship”, which included repaying the $US850m Bluestone borrowed from Greensill from 2023.

Bluestone said that it representatives met with Mr Hartley-Urquhart on February 20 at White Sulphur Springs in West Virginia and “demanded Bluestone pay $US300m by the end of the third quarter 2021”.

Six days later, Mr Hartley-Urquhart approached Bluestone “to demand repayment by Bluestone of $US850m by the end of third quarter 2021”.

“Greensill Capital and Mr Hartley-Urquhart knew that Greensill Capital’s financial condition was deteriorating in the months leading up to the commencement of the insolvency proceedings and failed to alert plaintiffs (Bluestone) to the severity of the situation.

“Greensill Capital and Mr. Hartley-Urquhart consistently assured Plaintiffs of the Defendant Greensill Capital’s financial health, hiding the true facts of Greensill Capital’s rapidly deteriorating condition in an effort to extract additional value from plaintiffs.

“By obscuring Greensill Capital’s financial condition, defendants Greensill Capital and Mr Hartley-Urquhart fraudulently induced Bluestone to pay fees, grant security interests and issue warrants to Greensill Capital and not seek replacement sources of financings all in reliance on Defendants’ assurances that it was a reliable, stable, long-term source of financing.”