Another SoftBank Unicorn Gets in Trouble: “Reverse Factoring” Specialist Greensill

“Its track record of disrupting traditional financing” hit by fallout from client companies that suddenly collapsed under undisclosed debts. Tentacles spread to Credit Suisse.

By Nick Corbishley, for WOLF STREET:

SoftBank appears to have a brand new problem on its hands: UK-based unicorn Greensill. Last year, SoftBank’s Vision Fund invested  $1.45 billion in two rounds in this company. The second round pushed its “valuation,” decided behind closed doors, to $6 billion. The stated purpose was to allow Greensill to continue “its track record of disrupting traditional financing.”

Greensill provides supply chain financing in form of “reverse factoring” which can be used by companies to create the illusion of cash flow, reduce the appearance of debt, and mask the true state of their leverage ratios. Three of Greensill’s reverse-factoring client companies — NMC Health, rent-to-own retailer BrightHouse, and Singapore commodities trader Agritrade — have spectacularly collapsed over the past three months, under billions of dollars of undisclosed debts and amid red-hot accounting scandals. And the tentacles have spread to Greensill’s and SoftBank’s relationships with Credit Suisse:

NMC Health, which in early March we dubbed “the first Enron” of 2020 after the UAE-based FTSE 100 health care company suddenly “discovered” $2.7 billion of undisclosed debt, on top of its $2.1 billion of disclosed debt. Since then, an additional $1.8 billion of heretofore hidden debt has been unearthed, taking the company’s total debt load to $6.6 billion.

BrightHouse, the UK’s largest rent-to-own lender whose business model essentially consisted of providing finance rental agreements to cash-strapped consumers. Those consumers ended up owning the products they rented as long as they were able to endure the long payment periods and exorbitant interest rates, which could reach as high as 69.9% APR. Many did not. The UK government’s announcement of a three-month payment freeze on rent-to-own loans in April, as part of its Covid-19 measures, was the final straw for Brighthouse, which already faced millions in compensation claims.

Agritrade, a Singaporean commodities trader, that went under in February, after many of its banks refused to continue backing its souring commodities bets. At its demise the company had $1.55 billion in outstanding liabilities to dozens of creditors, including $983 million owed to secured lenders. Many of its lenders accuse the company of misreporting and other financial regularities. “There is strong evidence that a massive, premeditated and systematic fraud has been perpetrated by the defendants,” said Dutch bank ING, which is on the hook for some $100 million of the debt.

What these three now insolvent companies had in common was that Greensill arranged reverse factoring financing for them. Here’s how it works: a company hires a financial intermediary, such as Greensill, to pay a supplier promptly (e.g. 15 days after invoicing) in return for a discount on their invoices. The company repays the intermediary at a later date. This effectively turns the company’s accounts payable into financial debt that is owed to a financial institution. But this debt was not disclosed as debt and remained hidden to investors and auditors.

Greensill may now have to cover some of the losses resulting from its funding of these three insolvent companies. That funding was arranged through a number of funds belonging to Credit Suisse, which forms part of an incestuous relationship with Greensill and SoftBank. Credit Suisse’s asset management division relies solely on Greensill to source investment opportunities for more than $8 billion of supply chain finance funds, according to the FT. And as much as 15% of that money ends up going to companies controlled by SoftBank’s Vision Fund.

In other words, Greensill exclusively brokers the assets of Credit Suisse’s supply chain business. Then, by some shocking coincidence, many of those assets end up financing companies funded by Greensill’s biggest investor, SoftBank’s Vision Fund — which already booked a $16.7-billion loss for its fiscal year ended March 31. Among the companies receiving the funds are car financing business Fair Financial, hotel chain OYO Hospitality, window manufacturer View and auto sales company Guazi.

In past years, Greensill was also instrumental in helping both Abengoa conceal its outsize debts and obligations until the day it collapsed, leaving investors shouldering billions in losses. As has happened with NMC Health, new debts and liabilities just kept popping up.

Greensill’s Australian owner, Lex Greensill, a former Morgan Stanley and Citigroup banker, continues to boast of being one of Europe’s largest non-bank bond issuers. Greensill is also among a number of supply chain finance firms being tapped as external advisors for the UK government’s business support program. Clearly, the huge supply-chain disruption and financial mayhem being caused by the virus crisis opens up opportunities for supply chain finance firms like Greensill to exploit.

Even before the crisis began, Greensill had acquired Freeup, a London-based company that is developing technology to enable workers to receive early payment for earned, but unpaid, wages, supposedly at zero cost to the employee. By applying a similar model to its reverse factoring services, Greensill hopes to install itself as a financial middleman between companies with cash-flow problems and their employees, just as it has between hard-up companies and their suppliers. But in order to fulfill that new role, it will have to get through the current crisis first. By Nick Corbishley, for WOLF STREET.

But those paper gains that SoftBank had booked sure were fun while they lasted. Read... SoftBank’s Fake Startup “Valuations” Come Unglued

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  55 comments for “Another SoftBank Unicorn Gets in Trouble: “Reverse Factoring” Specialist Greensill

  1. Iindie says:

    Many Enron like situations will emerge in the coming months ! Thank you Wolf for keeping us appraised of the coming default storms ahead of us !

  2. 2banana says:

    This will not end until these “executives” get nice long jail terms.

    And 6 am perp walks. Or, better yet, in their $3,000 suits dragged out of their offices in front of the cameras.

    Like Iceland just recently did.

    Or like in the states in the 1980s, where over 1,000 bankers were prosecuted and jailed by the Justice Department.

    • MC01 says:

      Iceland is about to face another day of reckoning as their dependance on tourism makes Portugal, Spain and even Greece look like highly balanced economies by comparison. Only this time there won’t be scapegoats to allow local politicians to save their worthless hides.

      Reverse factoring has been an attempt to export around the world one of the payment models used by Japanese corporations to allow them to hide debts, especially to domestically-based vendors.
      The model was already in trouble when Ataka & Co, a sogo shosha (general trading house) which had praticed it with particular enthusiasm, collapsed in the late 70’s. Sumitomo Bank was forced to cover up all of Ataka’s losses to avoid a scandal of enormous proportions from blowing up, as Sumitomo was in a position very similar to Credit Suisse’s.

      Credit Suisse will have to either cover up a large part of Greensill’s losses, like Sumitomo did with Ataka, or allow everybody to see what they were up to, including regulators: people may not end up in jail for white collar crimes, but like Deutsche Bank learned heavy fines and a tarnished reputation (as German companies are steadily moving from DB and Commerzbank to smaller local banks) are not good for business.

      • Olivier says:

        So reverse factoring is not a product of our post-80s casino finance but a japanese invention from the 70s that already went bad there? Fascinating. This is why I read WS.

        • char says:

          Reverse factoring sounds to me something very logical for a zaibatsu to do for its zaibarsu members and their suppliers. So much earlier than 1970

          If a company gets into trouble a bank will often start to decide on payments by that company. Did sounds awfully like reverse factoring.

  3. Tim says:

    Please, please, dear fellow denizens of the ‘why the f**k are we right now’ parish group, watch the Blackadder sketch of ‘Belt off, trousers down, isn’t life a scream’.

  4. cb says:

    Nick said: ” Here’s how it works: a company hires a financial intermediary, such as Greensill, to pay a supplier promptly (e.g. 15 days after invoicing) in return for a discount on their invoices. The company repays the intermediary at a later date. This effectively turns the company’s accounts payable into financial debt that is owed to a financial institution. But this debt was not disclosed as debt and remained hidden to investors and auditors.”

    Short version of “Here’s how it works:” Fraud.

    or at least that’s the ultimate result. I suppose GAAP (Generally Accepted Accounting Practices) doesn’t cover this.???

    • Bernadette Ferrer says:

      How about 21st Century Ponzi Scheme paradigm?

      They all got away — with monies in Isle of Man, Lithuania or Malta.

      No One is going to Club Med prison.

      • Patrick Lewis says:

        I agree with a lot of the comments, but come on the Isle of Man, I have lived there all my life and I can tell you that just trying to get a bank account is near impossible, unless of course you know someone nudge nudge wink wink.

    • Cas127 says:

      “This effectively turns the company’s accounts payable into financial debt that is owed to a financial institution. But this debt was not disclosed as debt and remained hidden to investors and auditors.”

      Pretty puzzled (even under GAAP-is-crap assumptions) how “financial debt that is owed to a financial institution” can avoid showing up as debt.

      Accounts payable show up as debt.

      Loans show up as debt.

      GAAP has plenty of weasel room…but this company doesn’t even seem to have a weasel.

      I am curious as to the accounting loophole that theoretically makes this thing work.

      • Icanwalk says:

        It would appear that it would make the companies current ratio look better.

        Not that fundamentals matter any more?

        • Cas127 says:

          Agreed that it would improve current ratio, and that ratio is usually subject to debt covenant constraints…but so are total debt ratios, so I don’t know how much shifting liabilities across line items really gets the company.

          Maybe it buys them a little more time (current ratio covenant triggers acting faster than total debt triggers? Maybe…)

      • Beardawg says:

        Ditto – debt is debt on a balance sheet – not understanding the scheme (i.e. how it is hidden).

        • Cas127 says:


          Could you shine a little light on the acctg std that makes this work?

          Off balance sheet debt is definitely a thing…but the accounting std usually presents a rationale (bogus or not, abused or not).

          Here is it hard to see how simply shifting from AP to loan gets the debt off the balance sheet…it would just change line items where it shows up.

        • cb says:

          I’m with you Beardog and Cas 127 –

          Nick, or any other financial writer, need to support the core thesis of their article to maintain credibility and readership.

          Is there a legal basis for “covering” up a conversion from accounts payable to an off balance sheet from of debt? If so were is the legal loophole? In GAAP? or???

          is it FRAUD?

          or is it just sloppy writing?

          (It isn’t easy following the high standards of Wolf.)

        • Wolf Richter says:


          It’s “fraud” when a criminal court decides it’s fraud.

          There are a lot of things for which accounting rules can be abused and twisted, and it might be hard to prove in court that it was “fraud” (“beyond a reasonable doubt” in the US!), and so prosecutors often don’t even try. But the company collapsed anyway, and no one outside knew this issue was there until it blew up. This triggers civil lawsuits galore. This stuff is complex litigation that can take years to sort out.

      • Henri says:

        Yeah this isn’t a special scheme, it’s literally just fraud. And I’m shocked the auditors missed this – it’s so easy to check if a payable was paid via a bank account.

        DR trade payable CR???? Those books are cooked, and everyone that touched those accounts deserves jail time

  5. char says:

    Is this the kind of reverse factoring where the middleman can ask the money back if the company goes bankrupt?

  6. Bob Hoye says:

    Much of today’s incredible speculative tools derives from the Federal Reserve System. Which its original promoters touted as being able to prevent recessions. Which believed in for long enough removed all regard for risk.
    In the early 1900s, the establishment knew that financial setbacks preceded recessions.
    The Fed as lender of “last resort” would prevent the crises that triggered recessions.
    Even I will admit that it is is an appealing theory, but it has never worked.
    There has been 18 recessions since the Fed opened its doors in January 1914.
    This has been a highly speculative theory for generations.
    Then over the past decade it has been applied in an increasingly reckless manner.
    The theory is speculative and the practice is speculative.
    And since there were enough stocks traded to consider it a stock market (1650s) the record shows that the public can create the wildest of speculations.
    With or without central bank recklessness.
    Eventually, this post-bubble contraction will collapse all, repeat all, speculations as well as speculative theories.

    • char says:

      Before the central bank the recessions were bigger. And that was in a time where there were still a lot of subsistence farmers

    • Stephen C. says:

      specious, actually.

  7. cb says:

    Recessions are part of societal nature. They are healthy to the overall system and shouldn’t be meddled with, particularly by a FED whose cure is worse than the affliction.

  8. J.M.Keynes says:

    – Why did SoftBank get involved in Greensill in the first place ? Is this what “FinTech” is all about ?

  9. “The illusions of cash flow”.. I think we’re about to discover major banks were part, maybe a very large part, of shadow banking.

  10. MonkeyBusiness says:

    As long as US Banks are fine, and by all looks they are fine, we in the US should be fine.

    Back in 2008, banks looked shaky at this point in time. We’ve gone through stress tests though right?

    • char says:

      What about non-bank banks. See for example how India crashed their car market with failing non-bank banks.

  11. Jdog says:

    Are we finally going to see the reckoning of moral hazards?

    • WES says:


      Zero interest rates removes all moral hazards!

      • Bobby Dents says:

        Low interest rates can actually lower leverage and create less risk. It’s the paradox in a frozen credit market.

  12. Raymond Rogers says:

    Well I guess we will see another 200 billion liquidy swap from the FED to the BOJ (essentially the parent of Softbank). So we’ll see more of these entities created by Softbank as they have much less downside than in an actual “market”.

    • Moneyman says:

      That won’t solve anything. The business turns unprofitable. It’s done.

      • Raymond Rogers says:

        The point being that Softbank just keeps getting buckets of mud to throw at the wall. Maybe one time it might stick.

        • Benny d’Ansa says:

          Vodafone use this massively, were implicated in the GAM frauds, their Treasurer now works for Greensill.

          Bunge used this massively through their Swiss office, were implicated in the GAM frauds, their head of structuring now works for Greensill.

          Former British Prime Minister David Cameron made Lex Greensill a CBE, now is a paid advisor to Greensill.

          David Solo, former CEO of GAM, was a shareholder, creditor and paid advisor to Greensill before introducing them to GAM before the frauds brought GAM to its knees.

          And still no action from Swiss, UK or US regulators.
          Truly shocking.

  13. Bobby Dents says:

    Lack of profits and ability to service debt is the killer. That is why I find corporate bonds vastly overrated. It doesn’t matter who owns them, loses create a condition that makes bankruptcy unavoidable when the business can’t generate enough profits to service debt

  14. LeClerc says:

    Straight-up crooks.

    Nothing will happen to them.

  15. Oliver Oliver says:

    Plenty of complications for Greensill in Oz
    “Greensill puts slow payers on notice
    The Australian – Page 16 : 8 May 2020
    Original article by Nick Evans, Jared Lynch

    Roy Morgan Summary

    Small Business Ombudsman Kate Carnell has welcomed a statement by supply chain financier Greensill regarding the use of its services. Greensill stated it had given a “final warning” to companies who use its services in order to push payment times to small businesses beyond 30 days. Its statement follows the revelation that CIMIC unit UGL was offering Greensill’s services on a tender with payment terms of up to 95 days, despite Greensill stating in February that it would sever connections with companies that have payment terms of longer than 30 days. Carnell says federal legislation that requires small business to be paid in 30 days is the only way to achieve substantial cultural change in business payment performance.”

  16. Willy Winky says:

    Basically this is legalized fraud.

    It’s a nice gig if fraud is the basis of your business plan.

  17. Beardawg says:

    Debt on a balance sheet (Acct payable, bond debt) is a liability, plain and simple. It would seem reverse factoring, reported as a “loan,” is simply that – debt which must be paid. Perhaps I did not understand the transition from an acct payable to a loan debt as a line item in a balance sheet? If, for instance, a company has a $1MIL payable with a 30/60/90 prepayment term, but instead amortizes that over 10 years (via a Greensill loan) to be a $10K / month “loan expense” – thus giving the appearance that the $1MIL payable is only $10K in total ? Is that how this is perpetrated? If so, strangely genius and reckless at the same time.

    • Wolf Richter says:

      Accounts payable are not considered “debt,” though they’re a liability. The current bill from your phone company is not a “debt.” But your mortgage is a “debt” and your credit card balance is a “debt.” Same with companies. It’s a big important distinction. All kinds of formulas depend on it.

      Reverse factoring is never the only thing that trips up a company. There are other things they’re doing. But in the cases cited, it was one of the factors.

      • cb says:

        The question Wolf, is how does a conversion from an account payable to a debt, allow both to disappear from the balance sheet? Is that Legal? Does GAAP (generally accepted accounting principles) allow that?

        Can Nick, author of the article, answer that?

        • Wolf Richter says:


          There are now some things being mingled together here in the comments that should be kept separate.

          Reverse factoring leaves the liability on the balance sheet. But it creates a financial debt, namely a bank loan, that should be disclosed as a financial debt. If this is done, there is no problem with reverse factoring.

          But a company can choose not to disclose this as a financial debt, and leaves this debt in its accounts payable. Then this is a misstatement of its actual debt. So it’s “hidden debt,” but it’s not a “hidden liability,” and it’s not “off the balance sheet.”

          Then there are many other accounting schemes that can be used to hide debt and get it off the balance sheet entirely. For example, at a basic level, even lease accounting can fall into that category, though the rules have been clarified in recent years.

          Then there are schemes that are much closer to fraud, rather than just a different interpretation of an accounting principle.

          It seems accounting principles, depending on country, may be somewhat vague on that issue of how to account for the debt in reverse factoring (as they are on many issues) and leave enough wriggle room to where it’s not clearly an accounting misstatement.

          There has been some discussion on this in the accounting and bond-ratings industry because it’s becoming a big issue and a lot of companies are doing it, and they’re not disclosing it as financial debt, and bond ratings agencies have trouble rating those companies because their debts appear to be lower than what they actually are. Fitch has been fairly vocal about this.

          That said, reverse factoring alone normally is not the only factor when a company suddenly collapses. These types of companies use all available schemes to hide debt, and reverse factoring is only one of them. So with some of the companies that collapsed, such as NMC Health, reverse factoring was only one of many factors, and probably not the largest factor.

          After a company collapses, it often takes many months or longer to sort out exactly what all was done to hide debt… and even to find that debt. Remember, this is done by very smart people who know what they’re doing and who have a lot of expertise in it.

        • cb says:

          Thanks for a full response Wolf. Very clear writing. Though I must disagree when you say:

          “Remember, this is done by very smart people who know what they’re doing and who have a lot of expertise in it.”

          It is more accurate to sat this is done by corrupt people in the face of weak laws which allow it. We must avoid complimenting shrewd, larcenous, psychopathic bastards who get ahead only by parasiting off of the group at large. It’s easy to look smart when you are a successful cheater among a group of non-cheaters. Our laws are supposed to rectify this; unfortunately they currently seem only to amplify it. Thieves and crooks prosper. But let us clearly call them out for the scum they are.

        • Tim says:

          Cleverness only goes so far.

          No one cares as long as the spinning of expectations continues.

          But I wonder if certain bodies aren’t looking to a very different environment and wondering how they can build credibility in anticipation of being valued arbiters in that ‘new’ environment.

          Whereas, previously, it was in their interests to not be so… interested.

          Dunno, what do you think?

  18. NOW I get it! Economics is all a con game! All this time I thought it was just SUPER brainy and way above my head! LOL!

    • MD says:

      “If anybody ever tells you anything about an aeroplane which is so bloody complicated you can’t understand it, take it from me: it’s all ba11s”

      R J Mitchell, inventor of the Supermarine Spitfire.

      Quite a lot of the contemporary speculative casino finance system seems to rely on opaque language and sophisticated mechanisms to enact fraud. Oh, and massive handouts from central banks, given freely even when the surrounding citizens are being told they must live with austerity.

  19. norman says:

    Did you know that Supply Chain Financing, i.e. reverse factoring was endorsed by UK Prime Minister Cameron in 2012. See the endorsement at UK Prime Minister announces Supply Chain Financing Scheme.
    “A ground breaking agreement with leading UK companies that will help tens of thousands of businesses secure increased levels of affordable finance was announced by the Prime Minister today, in a move that will support job growth and help aspiring business get ahead”.

    “The Prime Minister today met with the leaders of some of the UK’s largest companies at Downing Street to discuss the important role they play in supporting their supply chains. As a result of the discussion, the following companies have agreed to boost this support by actively evaluating the implementation of, or continuing to offer, Supply Chain Finance”.

  20. MD says:

    “But this debt was not disclosed as debt and remained hidden to investors and auditors.”

    So whether or not it’s legal – it’s just fraud. The kind of stuff that very probably was illegal until the 80s/90s and the removal of the shackles of the ‘wealth creators’ to enable them to destroy the world’s economy in their pursuit of a Bugatti Veyron.

    • Em says:

      You nailed it.
      It’sbof the same type as share buy-back. Financial ballet, sand in the eyes, tricky tricks.

  21. Disgusted In Mount Pleasant says:

    How it works – like this, I imagine. Remember an auditor is never going to find anything because they don’t look for it in the first place. Even if hard cash was flowing out the back door in 18-wheelers you could probably convince them it’s all legit. So the accounts payable doesn’t get re-classed, it stays right where it is, as A/P, not debt. On those occasions when you actually pay the middleman you clear out some A/P accordingly which offsets the money leaving your bank account.

    It’s hidden in plain sight – but nobody’s looking for it.

  22. LouisDeLaSmart says:

    “…company suddenly “discovered” $2.7 billion of undisclosed debt, on top of its $2.1 billion of disclosed debt.” Yes I read the previous article but it is unclear to me how this can happen.
    How can one hide this much debt?
    Are there legal repricutions for the company for not disclosing all it’s liabilities?
    Is there absolutely anything that Wallstreet can do and not get away with it?

  23. Jay Johnson says:

    There’s always a Khazarian mixed up in such messes. Always. Plunder and destroy.

  24. Tang says:

    great stuff and thanks again Wolf. You get nothing of these from main media. In my country authorities responsible you hardly hear from them. They prefer to dilly dally.

Comments are closed.