Fallout from Greensill will last for years

CREDITORS of collapsed alternative lender Greensill Capital may suffer significant losses and are not guaranteed to get anything back, according to administrator Grant Thornton.

The insolvency group’s initial report on the failure of Greensill will be sent to creditors within days and it will give them an initial idea of how much they can expect to get back.

It is believed that the Grant Thornton report will highlight how complex the case is, as well as a warning that payments to creditors, if any, depend upon how much money and assets it can find. One factor likely to limit payments to creditors is claims from Greensill’s Australian parent to the assets of the British lender.

Although supply chain financier Greensill was run out of London, it was headquartered in Australia and had significant dealings with a German bank it owned and a subsidiary in the US. It claimed to have provided over £100billion in finance to 10 million-plus customers and suppliers in 175 countries.

As a result, administration is likely to take years, according to insolvency sources. “Complex financial institutions take quite a lot to unravel,” said one insolvency practitioner.

Greensill went into administration at the start of March and as it was the main lender to Liberty Steel owner GFG, its collapse threatens 5,000 UK steel, aluminium and renewable energy jobs. GFG owner, billionaire Sanjeev Gupta, is scrambling to find alternative funding.

The largely unregulated lender’s troubles began when insurers decided not to renew their policies covering it for risk management reasons.

Investment banking giant Credit Suisse then froze its business dealings with Greensill due to the lack of insurance cover and concerns about the size of its exposure to GFG. It was forced into administration after it found it could not repay a loan to Credit Suisse and suffered defaults on loans given to GFG.

Gupta has asked the Government for a bailout for GFG, which was declined due to the opaque nature of his empire and fears taxpayers’ money could end up leaving the country.

Last week former City minister Lord Myners told the Treasury Committee hearing the failure of Greensill could cost the Government up to £5billion.

The parliamentary inquiry will also look into the conduct of ex-pm David Cameron, who unsuccessfully lobbied Treasury ministers and officials to get his employer Greensill access to Covid-19 support schemes.