Greensill Capital, founded in 2011 grew to become one of the biggest providers of supply-chain finance. Greensill say they have provided £143b in financing in 2020.
But Greensill recently filed for insolvency in the UK. Greensill Capital was valued at $3.5 billion less than two years ago. However the reasons behind the collapse are complex and now Former Prime Minister David Cameron is in the headlines.
What is behind Greensill's collapse?
The full picture is still emerging but Cedric Bru, CEO of Taulia, a provider of supply chain finance solutions says "it's clear that the collapse of Greensill Capital has nothing to do with Supply Chain Finance. Instead, it was a lesser-known side of their business which focused on risky, high-yield assets. Greensill Capital labeled itself as a Supply Chain Finance fintech, but decided to engage in lending practices whose characteristics do not intersect at all with Supply Chain Finance. These non-related lending practices ended up becoming non-performing and led to the downfall of Greensill."
The New York Times reports “He took the supplier invoices, turned them into short-term assets and put them into funds, similar to money market funds, that investors could buy. The funds were sold through Credit Suisse, the big Swiss lender, and a Swiss asset management firm called GAM. The money from investors helped to pay back suppliers.”
Read our explainers on Supply Chain Finance
Greensill, employed former U.K. Prime Minister David Cameron as an advisor.
The BBC reports that “Mr Cameron pressed Treasury officials - including reportedly sending Chancellor Rishi Sunak text messages - for emergency funding for Greensill Capital, a company in which the former prime minister had a financial interest.”
The Sunday Times reported that the former prime minister, who was an adviser and shareholder in Greensill, sent multiple texts to Rishi Sunak in April 2020, in hopes of gaining access to cheap, 100% government-backed loans through the Covid corporate financing facility (CCFF).
The firm has now gone bust, throwing the future of thousands of workers at Liberty Steel, a company backed by the finance house, into doubt.
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