Greensill’s faces liquidation Australian arm hit with $4.8bn in creditor claims

The first creditors meeting of collapsed global financier Greensill Capital has revealed a $4.8bn claim from two main creditors.

Financier Lex Greensill’s group has been hit with creditors’ claims worth almost $5 billion. Picture: Supplied.

Greensill’s administrators have hinted the collapsed financier is likely to be plunged into liquidation after creditors hit the Australian arm of its business for almost $4.8bn in claims and it struggles to find a buyer for its assets.

The sum — including $US1.15bn ($1.5bn) claimed by Japanese conglomerate Softbank — was revealed on Friday at the first creditors meeting for Greensill’s Australian operations, which was placed into administration last week along with the company’s UK operations.

Meanwhile its German-based Greensill Bank was declared insolvent this week, triggering a claim of up to €2bn ($3.08bn) from the Association of German Banks.

On the same day, ASIC deputy chair Karen Chester said Greensill – known for its controversial use of supply chain financing – was operating an “incredibly risky business model”, which it attempted to pass on to its insurers, including QBE as well as IAG and Tokio Marine.

Furthermore, Ms Chester confirmed ASIC was working with the Australian Prudential Regulatory Authority as part of an investigation into Australian operations.

Greensill filed for insolvency last week 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 as buyers of the debt securities it issued.

It also funded its supply chain financing platform – which involves paying the invoices of a company’s supplier earlier in exchange for a discount from the supplier – by issuing bonds via Greensill Bank.

Greensill Bank’s insolvency now leaves small German towns as creditors, with deposits from at least 12 towns across the country totalling €200m.

But its mum and dad depositors are protected by Germany’s Deposit Guarantee Act – which provides compensation to mum and dad depositors up to €100,000, and €500,000 in certain exceptional cases. The Association of German Banks said if individual deposits were fully compensated for under the scheme, its claim against Greensill would total up to €2bn.

But this is a contingency claim, with the association yet to fully quantify how much individual Greensill Bank depositors are owed. Removing the association’s claim, administrators from Grant Thornton so far received claims totaling $1.75bn, which they are currently validating.

Of those claim submissions, SoftBank – which was Greensill’s biggest backer, made a $US1.15bn ($1.49bn) claim. It comes after it signalled doubt about Greensill’s operations late last year when it wrote down its $US1.5bn stake in the company.

Other claims included $US140m from Credit Suisse and $US60m from the Peter Greensill Family Trust. Credit Suisse has appointed McGrathNicol over shares Greensill’s parent owns in the UK operation.

Administrator Matt Byrnes, of Grant Thornton, is looking to recoup some of the cash via a claim worth about $US800m that Greensill’s Australian business has submitted to the financier’s UK arm, which is also under administration.

But Greensill’s Australian arm is likely to be placed into liquidation if a buyer can’t be found for its assets and a deed of company arrangement (DOCA) struck.

“The administrators confirmed to creditors that, at this stage, they have not received a DOCA proposal for consideration,” Mr Bryne’s team said in a statement.

Its UK operation is also struggling to find a buyer after US private equity group Apollo Global Management abandoned a deal to buy most of its assets. 500 of Greensill’s British employees have now been retrenched.

ASIC deputy chair Karen Chester said the regulator was looking into Greensill marketing securities to wholesale Australian investors.

“Then there were some Australian investment banks involved in promoting a potential IPO for Greensill late last year.”

The Australian revealed last week that it engaged Grant Thornton in late December to provide contingency advice, ranging from restructuring to potential insolvency, within weeks of Greensill spruiking a $US600m pre-IPO capital raising. The capital raising was abandoned but Greensill hosted a series of zoom meetings with potential investors.

“The parent of Greensill is an Australian entity and the founder is an Australian so there may be some corporate governance issues that we may look at as well,” Ms Chester said.

“There’s a lot of touch points in ASIC with this matter. There’s our managed investment scheme folk, there’s our insurance group, our corporate governance team, our IPO disclosure team.”

Ms Chester said Greensill was operating what “became an incredibly risking business model”.

“When they’re trying to transfer that risk to other parties like insurers, it turns what can be a very effective way for small and medium-sized businesses to manage their cashflows into high-risk management of those cashflows if the entity falls away and all of a sudden you’re without that cashflow management and you’ve got to redo it. But also to those who invested in the funds.”

Ms Chester said ASIC had been “working in lockstep with APRA”, to gain a greater insight around the exposure of Australian insurers to Greensill.

“They’ve been working with insurers to get comfort around what exposures they might have. The key one was IAG given the level of exposure we’d understood that they had. But that is no longer the case.”

Similarly, a spokeswoman for QBE said the insurer had “no direct exposure to Greensill”.

In total, 59 creditors attended Friday’s meeting, which lasted for 55 minutes. German financial regulator BaFin, the Australian Taxation Office, ASIC and the Attorney-General’s department also attended.

The administrators said in a statement that “34 individual creditors have submitted claims, excluding employees”.

“But this number may increase as further claims are made in the administration.”

A creditors committee was also formed, which included representatives from SoftBank, Credit Suisse, a Greensill employee and another creditor.

The administrators confirmed that most of Greensill Australia’s 35 employees had been made redundant.

“A small number have been kept on to support the ongoing administration process. The administrators continue work closely with employees to assist in verifying their entitlements and in preparing to make claims to the federal government’s Fair Entitlements Guarantee (FEG) Scheme.”

A further report to creditors will be issued in about three weeks, with a second meeting scheduled for around April 22.