- General
- March 7, 2021
- 7 minutes read
SoftBank-Backed Greensill Capital On Verge Of Collapse
Greensill Capital, a supply chain finance company counting the SoftBank Vision Fund as its biggest outside backer, appears to be…
Greensill Capital, a supply chain finance company counting the SoftBank Vision Fund as its biggest outside backer, appears to be on the verge of insolvency after a series of woes led by Germany’s banking regulator BaFin issuing a ban on the operations of Greensill Bank, the eponymous bank operated by Greensill serving as its main source of finance operations.
Greensill’s woes with Germany’s financial regulator compounded other issues for the company including two of its biggest partners, banking firm Credit Suisse and asset manager GAM Holdings moving to close supply chain finance accounts it held with Greensill over concerns about its true value.
- Credit Suisse suspended $10 billion of funds it had with Greensill on Monday while GAM Holdings said it was closing its $842 million supply chain finance account with the company on Tuesday.
- With Credit Suisse and GAM among Greensill’s biggest supply chain finance partners, their moves to suspend their accounts with the company compounded by Germany’s regulator halting the operations of Greensill Bank effectively cuts off Greensill’s access to capital.
- It appears that Greensill is now looking to file for insolvency and sell for pennies on the dollar to a buyer. A spokesman for the company reportedly told The Guardian that it had entered a “period of exclusivity with a leading global financial institution” and that it plans to conclude a transaction soon. By rumors, that “leading global financial institution” should be Apollo Global, an American private equity giant looking to buy Greensill’s assets for about $100 million.
- Founded in 2011, Greensill Capital grew rapidly and was seemingly high-flying, racking up some $1.7 billion in venture funding along the way. The SoftBank Vision Fund is Greensill’s outside backer with a $1.5 billion investment in the finance company that now risks being wiped out. According to reports, SoftBank has significantly written down the value of its Greensill stake and is further considering writing it down to zero.
- Greensill would represent one of SoftBank’s biggest losses given its current state. The Wall Street Journal reports that the company has appointed British accounting firm Grant Thornton to help it through a possible restructuring or insolvency filing that’s likely to come soon.
- Greensill Capital specializes in supply chain finance, the business of paying debts owed by a company to suppliers at a slight discount and then collecting payments from the company later. Greensill makes a profit with the difference of the full payments made by a company to it and that it paid to the company’s suppliers with a discount.
- Along with its core supply chain finance business, Greensill also diversified its revenue streams into offering conventional banking services through its German banking subsidiary that’s now been shut down by the country’s financial regulator.
Germany’s financial regulator BaFin said it shut down Greensill Bank after finding it unable to provide evidence for the existence of receivables in its balance sheet that it had purchased from GFG Alliance Group, a conglomerate associated with controversial steel tycoon Sanjeev Gupta.
