Greensill Capital has filed for administration, warning it is in “severe financial distress”, unable to repay a $140m loan to Credit Suisse and experiencing “defaults” from its key customer GFG Alliance.
Lawyers for Greensill appeared before a UK court on Monday in a move that potentially paves the way for the US private equity group Apollo Global Management to buy parts of the ailing business.
The filing marks the latest stage of the unravelling of a SoftBank-backed company that had sought a $7bn valuation last year, with a business that spanned the UK and Australia.
Greensill specialises in supply chain finance, where businesses borrow money to pay their suppliers. It was thrown into crisis last week after its main insurer refused to renew a $4.6bn contract and Credit Suisse froze $10bn of funds linked to the firm, depriving it of an important source of funding.
Greensill’s lawyers said on Monday that the loss of this insurance contract “caused the real crunch”. They added that Greensill had about $5bn of exposure to metals magnate Sanjeev Gupta’s GFG Alliance group of companies, which is “currently experiencing financial difficulties” and has “started to default” on obligations to Greensill.
According to court documents, GFG said in a letter on February 7 that if Greensill stopped providing it with working capital it would collapse into insolvency.
GFG declined to comment.
Greensill’s lawyers said in court that Credit Suisse, citing “events of default”, had demanded repayment of a $140m loan it provided to Greensill in October. The lawyers said that Greensill had “no conceivable way” of repaying it.
The court hearing provided the most detailed account of Apollo’s attempts to acquire viable parts of Greensill Capital. That deal is not likely to result in returns for shareholders in Greensill Capital such as SoftBank’s Vision Fund, which poured $1.5bn into the company in 2019.
Apollo has made a $59.5m cash offer for Greensill’s intellectual property and IT systems that would involve it taking on “the majority” of the employees of its UK business Greensill Capital Management Company, according to the court documents. The US group is “the only credible bidder”, the documents say.
Apollo’s lawyer told the court the talks were still going on and there were “still a few matters to be sorted out” before a deal could be finalised.
Under a deal, Apollo would not take on any financing for GFG, the industrialist dubbed the “saviour of steel” in the UK who used Greensill as his main lender, people familiar with the matter said.
Apollo said on Monday that it would merge with Athene, the life insurance company that it created at the height of the financial crisis. Two people familiar with the matter said this would not stop the Greensill deal.
Additional reporting by Sylvia Pfeifer