Greensill Capital, a controversial bank that employs former UK prime minister David Cameron as an adviser, is seeking insolvency protection in Australia as two Swiss banks announced they were closing funds linked to the business over concerns about its true value.
The crisis engulfing the bank mounted on Tuesday night when Germany’s financial watchdog BaFin took over direct oversight of operations at Greensill Bank, a German division of the London-based supply-chain finance provider.
Greensill, which has turned its Australian founder Lex Greensill and his brother Peter into billionaires, insisted it would survive the crisis. A spokesman said the bank had “entered a period of exclusivity with a leading global financial institution” over securing emergency funding.
The bank, which specialises in supply-chain finance where businesses borrow money to pay bills, was plunged into crisis on Monday when Credit Suisse suspended $10bn (£7.2bn) of funds linked to Greensill, warning that there were “considerable uncertainties” about the true value of the assets.
Swiss asset manager GAM Holdings on Tuesday said it was also closing its $842m GAM Greensill supply chain finance fund because of “market developments and resulting media coverage”.
While Greensill is mostly based in London it is exploring “safe harbour” insolvency protection in Australia, according to the Financial Times. The company is registered in the Queensland city of Bundaberg, the hometown of Lex Greensill.
A spokesman for Greensill declined to comment about the Australian insolvency proceedings or the withdrawn funding from Credit Suisse and GAM.
But he said: “Greensill confirms that it has entered a period of exclusivity with a leading global financial institution with a view to concluding a transaction with them this week.
“The transaction is expected to include large parts of Greensill’s business and its assets under management. While the structure of the new business is still being determined, we expect the transaction will ensure the majority of Greensill clients will continue to be funded in the same way as they currently are while also preserving a substantial number of jobs.”
The niche lender, which provides financing to help companies spread the cost of their supply bills, relies on investors such as those brought in by Credit Suisse, to buy its assets. The moves by GAM and Credit Suisse deprive it of sources of funding.
Greensill promotes an interview he gave to the Australian Financial Review in 2018 about his success.
“The business is extraordinarily capital efficient and we’ve invested fully ourselves in growing the business because we wanted to maintain control,” Greensill said in the interview, promoted on this bank’s website. “The firm is still substantially owned by myself and the staff and I’m very proud of that … Dozens and dozens of our employees have become millionaires on the back of this.”
Cameron, a senior adviser to Greensill, regularly promotes the bank overseas. In December 2019, Cameron said: “From its UK foundations, Greensill has taken on the world, upending traditional financing models and democratising capital to give businesses, including many SMEs and small traders, access to low-cost funding.”
Before he formed Greensill in 2011, Lex Greensill, 44, worked in supply chain financing at Morgan Stanley and Citibank. He was also a “crown representative” to the UK government on supply chain finance, and was awarded a CBE for services to the economy in the Queen’s 2017 birthday honours.