How to deal with being caught by Lex Greensill

In the past few years, Mr. Greensill has entered into contracts to finance a nuclear submarine, finance dangerous startup companies and lend money to upgrade facilities used in the Muslim pilgrimage to Mecca , according to documents and people familiar with the proposed affairs.

While some of Mr. Greensill’s most speculative ideas never started, they reflect the magnitude of his high desire and tolerance for riskier investments, according to people familiar with the company.

Some of the contracts entered into included loans to companies in financial difficulty.

Mr. Greensill, formerly of Citigroup Inc. and Morgan Stanley banker, Greensill Capital in 2011. The company expanded supply chain finance, a type of short-term loan that helps clients manage their working capital. When companies’ supplier bills became payable, Greensill would be put in front of the payment, receive a cut and receive the full amount from the company down the road.

Mr Greensill has outlined expanding supply chain finance. While a special adviser on trade finance to the UK government and running Greensill, Mr Greensill proposed a few years ago a plan to use supply chain financing to pay for a multi-million-dollar nuclear submarine, said people familiar with the project. The idea was rejected because it would go wrong with government accounting rules, the people said. A spokesman for the UK government did not return requests for comment immediately.

One person familiar with the plan said the supply chain funding proposed by Mr Greensill would have been inadequate as submarines have been built to last for decades, so they have been paid. For the use of project finance, which is long-term.

As the industry attracted investors, Mr Greensill found new opportunities for contracts.

Private equity firm General Atlantic invested $ 250 million in Greensill in 2018 for a stake of about 15% in the company. He sold part of the lot and now owns about 7%, according to someone familiar with the deal.

In 2019, SoftBank Group Vision Fund Corp. about $ 1.5 billion into Greensill. The investment valued Greensill at $ 4 billion. Mr Greensill initially had a close relationship with SoftBank CEO Masayoshi Son, and the pair had phone calls almost every day, according to people familiar with the Greensill business.

SoftBank money encouraged rapid expansion. Greensill employees grew from around 500 at the end of 2019 to more than 1,000 recently. Greensill began lending to other companies that had received deposits from SoftBank.

At one point, Mr. Greensill and SoftBank officials discussed a plan to create deposits linked to the hajj, the Muslim pilgrimage to Mecca, according to documents reviewed by the Wall Street Journal and people familiar with the matter. The plan included the provision of loans for hotels, infrastructure and hajj-related transport, which would be wrapped into securities and sold to hackers. investment. The plan never materialized.

Mr Greensill did not return requests for comment. SoftBank and Credit Suisse declined to comment.

Another plan, called Project Olympus, involved a multi-billion dollar loan to the shared office company WeWork, according to people familiar with the matter. WeWork, which was backed by SoftBank Vision Fund, eventually rejected the plan, the people said. WeWork had been seen as a fraudulent Vision Fund but eventually needed support from SoftBank when it became a loss.

Of the loans Greensill provided, four of the largest went to Vision Fund companies. Early last year, it wanted to raise $ 600 million in funding it had given to the Oyo Hotels & Homes Indian hotel chain of up to $ 3 billion, according to a document reviewed by the Journal and people who was familiar with the matter.

The pumping funding would allow Greensill to “retain significant additional revenue through the remaining tax,” according to the document. The agreement fell apart as Covid-19 disbanded, one of the people said. Some Greensill executives felt they had been shot, as Oyo’s industry came under pressure through the pandemic as a result of travel restrictions, forcing workers to cut.

Oyo, a nonprofit, has been embroiled in controversy since its rapid expansion, the Magazine reported, involving thousands of hoteliers leaving their network amid complaints from many. that they were treated unfairly. The Vision Fund has written down the value of its stake in Oyo more than separately, the Journal said, citing someone familiar with the matter.

General Atlantic was surprised by another loan from Greensill. Greensill lent about $ 170 million for five years to another supply chain finance company called Tradeshift Network Ltd., according to people familiar with the matter. Normal supply chain finance contracts are for 60 to 120 days. Mr. Greensill withdrew the agreement on wine glasses with the CEO of Tradeshift. If Tradeshift failed, Greensill would own the company, those people said.

General Atlantic was caught up in the deal because he had earlier considered it but did not invest in Tradeshift, according to people familiar with the deal.

Last summer, Atlantic General Co-President Gabriel Caillaux was in the UK on a freelance business when Mr Greensill offered him a trip to his next destination on a Greensill private plane. Mr Caillaux on the flight warned Mr Greensill not to grow for the sake of growth, said someone familiar with the conversation. Mr Greensill reassured him that the company intended to meet its targets, the man said.

Greensill last year embarked on a fundraising tour to raise capital, hoping to raise around $ 1 billion, the Journal reported, citing people familiar with fundraising. Mr Greensill told people inside the company that General Atlantic planned to add several hundred dollars to the effort, people familiar with the matter said. A spokesman for General Atlantic denied that the company had considered investing in the tour.

The Greensill board was also concerned that most of the company’s income was tied up in loans to just a few businesses, people familiar with the board said.

One loan caused particular concern for some of the Greensill board: Katerra’s Vision Fund company, the start of construction, the people said. The disapproval of the contract shows the strong relationship between Greensill and SoftBank.

Katerra was close to filtering for bankruptcy last year when he was saved by SoftBank with a $ 200 million infusion. As part of the deal, Greensill forgot a $ 435 million loan in exchange for a 5% stake in the company, Katerra’s chief executive told the Journal in December. SoftBank then invested $ 400 million in Greensill to rally investors in a Credit Suisse fund open to Katerra, the Journal reported earlier, citing people familiar with capital movement.

In early November, General Atlantic asked the company to conduct a legal review of how Katerra’s situation was resolved, according to an email reviewed by the Journal. General Atlantic also asked the board’s risk committee to review all loans to SoftBank companies and resigned from the board’s audit committee.

Eventually, regulators and the company that insured the company’s loans took over from Mr. Greensill. The German banking regulator, which had asked Greensill to reduce its exposure to its largest client, called for a quicker move, Mr Greensill told the board earlier this year, an acquaintance said. table. Mr Greensill said the company would not be able to meet the deadline.

Shortly afterwards, one of the company’s insurers refused to update their policy. That forced Credit Suisse to freeze the currency, leading to Greensill’s bankruptcy.

Write to Julie Steinberg at [email protected] and Duncan Mavin at [email protected]