The Collapse of Greensill Capital, another SoftBank darling

[guru]

I’m sure there is much more to the story and the court case that we don’t know about. While insurance is supposed to insure against unexpected events, not against over-leveraged dealings that could not be supported by the business case. It’s also possible that insurance companies found stuff they weren’t told upfront.
If the business was sound then they’d be acquired or bailed out by hedge funds, private equity, banks, investors, etc. Funds are actually fighting for semi-bankrupt deals, as long as there are any assets, value or business potential left.

 

[JSOP]

I’m sure there is much more to the story and the court case that we don’t know about. While insurance is supposed to insure against unexpected events, not against over-leveraged dealings that could not be supported by the business case. It’s also possible that insurance companies found stuff they weren’t told upfront.
If the business was sound then they’d be acquired or bailed out by hedge funds, private equity, banks, investors, etc. Funds are actually fighting for semi-bankrupt deals, as long as there are any assets, value or business potential left.

Greensill's business is pretty straightforward and has got a sound business model. Paying out to the suppliers on one hand less than collecting from the buyers on the other hand and earning a spread in between. The only thing right now is his buyers are not paying because of covid-19 and his over-exposure to Liberty Steel which is tied up a bit because nobody is doing any s***. Once the economy has re-opened and everybody starts building (Biden's infrastructure plan *hint hint), the money will start rolling in. All he needs right now really is somebody to just step in and pledge some financing and say "look I will put in the money, anything happens I will be responsible" and that's it. They don't even need to put in their own money, just a promise!! The insurance company was supposed to do that. After all that's what they are called: insurance!! But they are too chicken s*** to do that and instead they just let a good company that set out to help the little guys fail.

Seriously, if I had the money, I would really go in and put in my pledge. And then I am going to hire the two guys from pulp fiction and visit every single of those deadbeat buyers for collection. Goodsill is a good business. It will have great business potential once the economy re-opens and all the economic activities resuming. Can't believe nobody sees this and is willing to help him.

 

[xappppp]

Supply Chain Finance has been there for many years as far as I know in the banking industry... not sure why Greensill's model is ultra-lucrative than any other banks, sounds quite fishy to me.

 

[newwurldmn]

Supply Chain Finance has been there for many years as far as I know in the banking industry... not sure why Greensill's model is ultra-lucrative than any other banks, sounds quite fishy to me.

I think it’s because he was selling the loans as CDO’s. All the supply chain guys I have spoken to claim that they keep the loans on their books.

 

[guru]

Greensill:
- was funding businesses and people like Easterday who were issuing fake invoices:
“Greensill Capital’s administrator has been unable to verify invoices underpinning loans to Liberty Steel owner Sanjeev Gupta, the Financial Times reported on Thursday.
Greensill’s administrator, Grant Thornton, has received denials from companies listed as debtors to the steel group stating that they had never done business with Gupta, the FT report added.”
(source: https://www.reuters.com/article/bri...-underpinning-loans-to-gupta-ft-idUSL4N2LU4D8 )

- Greensill was financing imaginary/potential/future clients and invoices:
“The more advanced way that Greensill Capital worked is that sometimes it would sit down with a client and imagine who might one day become a customer of that client, and then imagine how much of the client’s product that hypothetical customer might buy from the client, and then Greensill would pay the client early for those entirely hypothetical receivables, and then Greensill would collect the money later from the customer, if the customer actually became a customer and bought things from the client. If not, Greensill and the client would keep rolling the loans over and hope that one day the customer would show up. ”
(source: https://www.bloomberg.com/opinion/a...nanced-imaginary-invoices-for-gupta-s-liberty )

- was lending money to businesses who already borrowed money against the same invoices from the same companies that backed Greensill:
“Greensill, for its part, was shovelling money to companies backed by its own principal backer, SoftBank.”
(source: https://www.ft.com/content/70ba9c03-e207-4187-b62f-4b73c8fcac19 )

- “the group operated with an insane degree of undisclosed concentration to risky companies, exemplified by the Gupta exposure, while simultaneously trumpeting its (small-scale) contracts with big brands such as AstraZeneca and Airbus.”
(source: https://www.ft.com/content/70ba9c03-e207-4187-b62f-4b73c8fcac19 )

So even if Greensill wasn’t committing a fraud, he can be compared to WeWork with the dreamy ambitions founded on creativity, leverage, unsustainable business, and literally imaginary profits. Otherwise anyone is free to buy Greensill or start a similar business and back the same companies Greensill was backing.