Originally Midnight Riders #304 >>68596
Greensill Capital Tumbles Into Insolvency, Spreading Financial Pain
Greensill Capital filed for insolvency protection Monday, according to a person familiar with the company, days after regulators took over its banking unit and Credit Suisse Group AG froze investment funds that were critical to the startup’s operations.
The unwinding has rippled to holders of the Credit Suisse funds, German municipalities who deposited money with Greensill’s bank, and a high-profile duo of venture-capital investors. Greensill specialized in supply-chain finance, a type of short-term cash advance to companies to stretch out the time they have to pay their bills. The firm was once worth $4 billion based on investments from SoftBank Group Corp.’s Vision Fund. The collapse marks a high-profile blow for the mammoth Japanese investor.
Founded by Australian-born Lex Greensill, the company billed itself as a technology startup that competed with traditional banks such as Citigroup Inc. and JPMorgan Chase & Co. Greensill’s goal was to offer supply-chain finance to companies that had fallen below the radar of traditional banks that preferred larger, more established clientele. In a typical supply-chain finance deal, Greensill would pay a company’s suppliers sooner than they would normally expect, but at a discount. The company then would pay Greensill the full amount down the road. The supplier would get paid early, the company would have more flexibility over its cash, and Greensill would be left with a small profit. Instead of holding the cash advances—which typically get renewed every 60 or 120 days—on its balance sheet like a traditional bank, Greensill spun most of them into bondlike securities, or notes. Investment funds managed by Credit Suisse and GAM Holding AG scooped up those notes, providing professional investor clients with what appeared to be a low-risk way to eke out higher returns than could be gained in bank accounts or money-market funds. The funds in essence served as off-balance-sheet financing for Greensill.
Greensill’s operations seized last week when Credit Suisse stopped investors from taking money in or out the $10 billion in supply-chain investment funds. GAM followed suit the next day with its $800 million fund. Both have said they would wind down the funds. The Credit Suisse move was triggered after Greensill lost coverage from a set of credit insurers that provided protection in case the startup’s clients defaulted. The insurance was crucial because it made Greensill’s assets appear safer to Credit Suisse’s institutional investors, some of whom are restricted from putting cash into riskier investments.
https://www.wsj.com/articles/greensill-capital-tumbles-into-insolvency-spreading-financial-pain-11615216346
David Cameron is an "advisor" at Grennsill Capital