SoftBank Fintech Unicorn Greensill on Verge of Collapse

A massive murky mess of supply-chain finance, amid criminal allegations against the management of its German bank subsidiary, with wide repercussions.

By Nick Corbishley for WOLF STREET:

Supply chain finance giant Greensill Capital is expected to file for insolvency in the UK, and its parent company in Australia has already filed for insolvency there, after its credit insurers refused to renew $4.6 billion in credit insurance policies on March 1. Those policies provided protection against default of some of the holdings in the Credit Suisse supply-chain funds for which Greensill sourced the assets.

Greensill warned of “catastrophic” consequences if its credit insurance policies are not renewed. Some of the 40 clients covered could become insolvent, it said, putting at risk as many as 50,000 jobs globally, including thousands of jobs in the UK’s steel industry.

Credit Suisse, one of the firm’s biggest sources of funding, responded to the news that the credit insurance had lapsed on Monday by freezing four funds managed by Greensill with a combined book value of $10 billion. Swiss fund management giant GAM Investments followed suit on Tuesday by closing its $842 million GAM Greensill Supply Chain Finance fund to subscriptions and redemptions. Both companies said they had frozen the funds due to concerns about the true value of Greensill’s assets.

On Wednesday, Germany’s financial regulator BaFin announced that it had imposed a moratorium on Greensill Bank. The ban, covering both disposals and payments, was necessary because of “an imminent risk that the bank will become over-indebted,” said BaFin. The watchdog also filed a criminal complaint against the bank’s management for suspected balance sheet manipulation.

On Thursday night, Greensill Bank’s biggest client, Sanjeev Gupta’s GFG Alliance, announced that it had begun withholding payments.

Greensill is one of the world’s biggest providers of supply chain finance, also called “reverse factoring.” On its website Greensill claims that it issued over $143 billion in funding to over 10 million customers in 2019.

A company with accounts payables hires Greensill to pay its suppliers promptly (e.g. 15 days after invoicing) in return for a discount on their invoices. The company repays Greensill at a later date, thereby converting its trade accounts payable into a financial debt, without having to disclose it as financial debt.

Greensill, rather than wait for the payment from the company, bundles the invoices into securities and sells them to asset managers, insurers, and pension funds. In Greensill’s case, one of the biggest buyers was Credit Suisse.

For Greensill’s client companies, the fact that they don’t have to disclose this financial debt from supply chain finance allows them to conceal the true size of their debts, leaving investors and creditors with bigger losses when they finally do collapse. That’s what happened with Spanish energy giant Abengoa when it defaulted on its debt for the first time in 2015, and NMC Health, the former FTSE 100 private hospital company that collapsed in 2020. Greensill clients Brighthouse Ltd. and Katerra, also backed by SoftBank, also hit the wall last year.

SoftBank wrote down significantly the value of its $1.5 billion investment in Greensill at the end of 2020.

On Monday, Greensill’s parent company in Australia tried to secure a court injunction in Australia to prevent its insurer, IAG’s Insurance Australia Limited, from pulling coverage for loans extended to its business borrowers, to no avail. The company’s “plan B” is to file for insolvency in the UK. According to sources cited by the WSJ, as part of the insolvency, it plans to sell off the rump of its business and assets under management to Apollo Global Management, whose insurance affiliates will replace around $7 billion in financing for corporate clients that had previously been arranged by Greensill.

The deal is reportedly for around $100 million — compared to the $4.5 billion valuation two years ago, when SoftBank’s Vision Fund provided $1.5 billion of funding.

Greensill has sought insolvency protection under Australia’s safe harbor laws for the rest of its business.

But the sale to Apollo could be scuppered by BaFin’s decision on Wednesday to turn its investigation of the firm’s banking unit, Greensill Bank AG, over to criminal prosecutors. Greensill Bank came about when Greensill Capital acquired in 2014 a tiny bank in Bremen, Nordfinanz Bank AG. Following the acquisition, its balance sheet grew rapidly with loans to steel magnate Sanjeev Gupta’s sprawling company GFG Alliance, which owns more than 200 manufacturing assets in 12 countries, generates annual revenue of $20 billion, and employs 35,000 people.

GFG Alliance’s corporate structure is deeply opaque. Not only is Mr Gupta Greensill Bank’s number one customer, he is also a former Greensill shareholder. A recent audit of the bank’s books conducted by KPMG at BaFin’s behest revealed the staggering scale of the bank’s exposure to Gupta’s companies, reports the Financial Times.

Greensill Bank’s loan book is around €3.5bn in size, according to people directly familiar with its balance sheet, and more than €2bn relates to receivables financing connected to Gupta’s businesses. A further amount comprises UK-government backed (emergency covid-19) loans to entities connected to the Indian-born businessman, which the Financial Times revealed last year had been provided by Greensill.

The bank was able to hide the extent of its exposure by presenting the loans to Gupta’s businesses as loans to the businesses’ suppliers. This made it appear that the bank had lots of different smaller borrowers instead of one big one.

Credit Suisse also cited Greensill’s heavy exposure to GFG Alliance assets as a reason for its decision to cut off funding to the four funds managed by Greensill. The credit insurance underpinning Greensill’s invoice-backed loans had been a major draw for investors who parked money in the Credit Suisse funds, allowing them to earn a decent yield from the packaged loans while taking little risk. Without the insurance, those assets became a lot riskier. Greensill also relied on insurance to protect the loans held by Greensill Bank, its German banking arm.

Some of Greensill Bank’s depositors could lose some or all of their deposits. Only the deposits of private investors and foundations are insured by the deposit protection fund of the Association of German Banks. The deposits of institutional investors such as other banks, other financial institutions, investment firms, and local authorities are not covered. According to Handelsblatt, as many as 50 German municipalities had deposits at the bank, in contravention of rules forbidding local authorities from entrusting funds with private banks. The municipalities were apparently lured by the relatively high interest rates Greensill Bank offered.

There are other possible repercussions of Greensill’s collapse. Thousands of jobs could be lost as companies that have grown to rely on Greensill’s supply chain finance services to pay their suppliers early may suddenly be cut off from this source of funding, and may have to pay all of their suppliers all at once. This could set off a destructive domino effect along supply chains. British taxpayers could end up on the hook for all the government-backed Covid-19 loans Greensill Bank provided to GFG Alliance. The insurance industry is also heavily exposed since it has provided protection for a lot of Greensill’s supply chain finance instruments. Any losses to the Credit Suisse funds could also flow to multiple parties, including credit insurers. By Nick Corbishley, for WOLF STREET.

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  77 comments for “SoftBank Fintech Unicorn Greensill on Verge of Collapse

  1. Trinacria says:

    Wow…when the tide finally truly and really recedes, there will not only be lots of naked swimmers but downright toxic materials everywhere. The likes of Enron, Worldcom, et all will look minor league in comparison as this is worldwide !!! Is it time for that next stimulus check yet??? Or, would that be a sedative that is needed?

    • Joan of Arc says:

      With QE going brrrrr around the clock in most all world central banks daily, spewing out trillion of digital units monthly, one would think that all zombies would be able float on the deep ocean of money. Instead, we seem to have thousands of zombies world wide on hour to hour life support, and dozens more already dead or dying on the vine while the water is yet deep and the tide is yet to move out.

  2. SnotFroth says:

    On Bloomberg 960 AM radio today someone was talking about recent big defaults in China testing the credit market’s stability.

    In Germany Greenswill rupturing and going down.

    Is a little whiff of inflation and higher rates shaking things up?

  3. WES says:

    So another zombie company, kept alive for years by central banker’s artificially low interest rates, finally meets it’s fate!

    Corruption and financial engineering can only take you so far.

    • DJ says:

      On the contrary! This was a company trying to take advantage of the low interest rates environment (negative rates in the case of Switzerland) and the extreme search for yield it creates. You take an investment, invoice financing, apply securitization, resell it in tranches at a higher yield than anything else available for the most part of the cap structure, and voila. Add to that business relationships soaked with conflicts of interest, a ton of opaqueness and greedy intermediaries.

    • Mark says:

      Clearly, Greensill didn’t have the advantage of illustrious leaders like Greenspan, Bernanke, Yellen and Powell.

      None of this could happen here, in a country so grateful for the pinnacle of leadership shown by these honest individuals.

    • NBay says:

      Being financially illiterate, I slowly read and actually DID follow Nick’s well explained “how it works” article, but if asked to sum it all up, I couldn’t. It does remind me of the Project Engineer (who I worked for) buying invoices when our newly invented laser-engraved widgets shipped, and paid the invoice immediately, and made 10% for it. Not sure how he got the money and it only lasted maybe a few years, until the company was well “over the hump” and doing well. (went from about 8, plus 3 owner family, to over 250 in 5 years). Quite an experience.

      But, as a Rockefeller friend told Bucky Fuller (and I believe him),
      “Why make business simple when you can make it complicated?”
      And I suppose that’s the way some people are….why is beyond me.

      • FatManCometh says:

        “I’ll gladly pay you Tuesday for a hamburger today.” J. Wellington Wimpy or… Greensill.

        The financialization process fundamentally relied on turning a operational liability (payable) into a financial intermediary’s short term asset by obscuring the various cash flows (costs of insurance, intermediary’s grift/skim, loan costs, actual payable, etc. and staggering payment). Like any good Ponzi, it works until Paul asks Peter to pay for all the various costs. It was never a durable process – it relied on hiding the peanut.

        Rehypothecation abounded and all along the way the ankle-biters took their piece of cheese. Tons of exotic financial businessmen floated their boats on the public’s stupidity. Credit-Suisse was a willing partner of this Ponzi just as JP Morgan was to Madoff’s Ponzi.

  4. Beardawg says:

    I would hate to be a regulator trying to follow the money in this type of spaghetti financing. I presume characterizing payables as non-liabilities via invoice factoring is a legal activity ? But the debt (payable) owed TO Greensill for providing the factoring has to show up somewhere on the books, even if it is categorized as some sort of contract service….right?

    Then Greensill can buy insurance in case its clients don’t pay ? Is that like PFI (Private Factoring Insurance) ? Who the hell underwrites something like that !!

    I guess I am just a little too much of an old school handshake kinda person. This story (confusing but well summarized by Nick) reflects how off the rails high finance has gone. I am pretty darn sure the institutional investors who bought these Factored Loan Obligation Payables (FLOP)’s had even less understanding than we have after reading this article.

    • Jon W says:

      Yeah I didn’t get that part either. Surely the debt must have to go somewhere on the books? Sure I get the benefits in much more generous credit terms than a myriad of small suppliers might offer, and the ability to shift it around the balance sheet, but it still is a liability owed by the company that has to go somewhere.

      Unless I’m missing something.

      • WES says:

        I think a liability gets re-labelled as an asset. Fraud.
        Like a hamburger being re- labelled as office supplies!

        • Trinacria says:

          Hamburger with a little helper, I guess…

        • Cashboy says:

          Like cooking Hamburgers in McDonalds is now product manufacturing.

        • Philipp says:

          Liability relabelled as an asset? Im not an accounting wizzard but debt/ liability is the counterposition of an asset, but it can never be labelled as an asset – my best guess is, that account payabes is relabelled as financial debt, which improves working capital – so the company receiving the financing appears financially more sound that it actually is

      • Anthony A. says:

        Maybe they put the debt in a Special Purpose Vehicle (SPV) that is off the books and label it as a debt being owed to Greensill (Greensill creates an asset). ?

      • Wisdom Seeker says:

        Don’t worry, this was all covered 50-some years ago in “How to Succeed in Business Without Really Trying”, the hit musical of the Go-Go Years:

        Finch (rapidly): That’s

        Bratt: Tell me that again?

        Finch: I can’t.


        Finch: I

        P.S. To my delight, I found the screenplay available free online… it’s out there.

    • RepubAnon says:

      I’d suggest making securitization of debt illegal. If the lenders have to keep the debt on their books, they’ll have more incentive to be careful.

      Supply chain financing has gotten very popular. It was easier to get suppliers on board with low interest rates. As interest rates go back up, the factoring fees rise, and the whole model gets less attractive to suppliers. Wall Street, of course, still loves the idea.

    • ThaiBoxing says:

      ‘trade accounts payable into a financial debt, without having to disclose it as financial debt’

      This is either complete rubbish/misunderstanding or straight up accounting fraud. If someone pays your creditors with the condition of you paying that person later, it never leaves the balance sheet. It might move from current liabilities to non current liabilities, but double entry dictates it never leaves the balance sheet unless its either physically paid by the company or it somehow hits the P&L (written off, would show as income). Otherwise the trial balance wouldn’t balance, and that would be one of the first things to be picked up in an audit. There are provisions in FRS101 and FRS102 that force all ‘off-balance sheet’ items to be disclosed in the notes in the accounts anyway. So absent of complete fraud, it is impossible for a creditor to leave the balance sheet.

      • Wolf Richter says:


        It seems you’re confusing a few things here.

        Reverse factoring (supply chain finance) is a three-party deal, involving a lender (Greensill in this case), a supplier, and a purchaser. There is an actual loan involved. The loan is money that the purchaser owes the lender. But that loan is hidden in “accounts payables” when it should be disclosed as “debt.”

        There is a huge difference between “accounts payables” and financial “debt.” Sure, they’re both on the balance sheet as liabilities. But a company’s credit-worthiness, measured by the financial formulas about debt and cashflow, are based on the amount of debt disclosed on the balance sheet. Reverse factoring creates a debt that is not included in debt, but is shuffled into accounts payables, and thus investors are being misled, thinking that the company is more creditworthy than it is.

        This is a huge issue. Accounting rules for now allow this treatment of reverse factoring, but there is pressure on FASB to change the rules. Credit ratings agencies also have long criticized this treatment of reverse factoring, stating that they cannot properly rate the company if they don’t know the full extent of the company’s debt.

        • Cookdoggie says:

          In other words, debt is a subset of total liabilities. The reverse factored crap lives in Accounts Payable, hidden from all the analysis and covenant restrictions that apply just to debt. Of course, one could ask why not look at total liabilities to analyze a company? Especially when trade account payables are ballooning relative to the size of the business. The answer is everyone is rewarded for looking the other way.

  5. Uncle Bob says:

    I would imagine that the humble clerical officers working in Accounts Payable and Accounts Receivable offices across the world never realised how much ‘excitement’ could arise from their mundane duties.

  6. Brad Tifman says:

    Some out there may understand that this was the plan all along. Too many will not.

    Two years ago it was clear to those paying attention that Greensill’s main goal was to undermine with debt Sanjeev Gupta’s assets in Europe. Once Gupta was dependent, the plug would be pulled and those assets picked up cheap by those in on the scheme.

    In the cross fire will, as usual, will be innocent businesses ensnared in the trap and more destitution for the people. More lost jobs and opportunities for the people, more losses for the people’s pension funds and savings, and a higher national debt burden to motivate even greater taxes on the people.

    Meanwhile, the assets and businesses of those dependent or indebted to Greensill will be snapped up cheap by the same vultures that were behind Greensill all along.

    As for Greensil?! My bet is that he’ll show up in government or another pension fund robbing hedge fund.

    So many watching, so few seeing.

    • nick kelly says:

      ‘Two years ago it was clear to those paying attention that Greensil’s main goal was to undermine with debt Sanjeev Gupta’s assets in Europe. Once Gupta was dependent, the plug would be pulled and those assets picked up cheap by those in on the scheme.’

      The predatory lender would need to get not just the assets, but also recover the money lent to Gupta. Any idea where it is ? No doubt his operation is deeply ‘opaque.’

      It’s Greensil that is the target of the criminal complaint from BaFin, not Gupta. If upheld. Greensil will be likely be barred from bidding on assets in the EU.

      Poor silly Gupta. To have built an empire only to have been gulled into borrowing too much money!

      • nick kelly says:

        PS: it would sure backfire if wily Gupta has mortgaged the assets beyond 100% of their value.

      • nick kelly says:

        There have long been questions about Gupta’s purchases of ratty UK steel assets, and Lex Greenshill’s lending to them via reverse factoring.
        Rather than ask which one of these operators was gulling the other, maybe we should ask if their victim was a third or forth party, with Credit Suisse holding the bag if the intermediaries can wriggle out.

    • Javert Chip says:

      Brad Tifman

      Wow, quite an imagination.

      How often do you change the tinfoil in your hats and shorts?

  7. TimTim says:

    Wow. This sort of thing could be a key part of keeping large zombie companies going.

    If credit insurance becomes tough to find across the board, ka-boom.

    Not sure how much effect government backed loans/other forms of stimulus will be then.

    • DJ says:

      Invoice financing / supply chain finance, is as old as it gets. Nothing new here besides the fact that this used to be done by banks a lot more. But post GFC regulations and the lack of risk/balance-sheet banks can deploy, they have been replaced somewhat by private funds

  8. PonderLife says:

    Wondering how this and other bank ruptures (bankruptcies) will eventually effect mortgages and personal loans. I always assumed that personal loans were untouchable. But if the magnitude of the collapse is large enough. . . ? As of late, I have learned to not assume anything anymore.

  9. Marc 60 says:

    So whilst all over the world everyone is seeing the lowest interest rates in living memory yet one bank from Germany specialising in reverse factoring can offer better then market or anyone else’s returns and yet no one smelt a rat. Truly beyond belief IMO.

    As for

    ” The municipalities were apparently lured by the relatively high interest rates Greensill Bank offered.”

    Well they deserve to lose all their money for being so dammed stupid but I am guessing it’s not actually their money they managed to lose. So others will carry the can and feel the pain as usual.

    • Cashboy says:

      Bank of Credit Commercial International (BCCI) was paying 1% or 2% higher interest rates in the late 80’s and 1990 and a few UK county councils kept their funds with BCCI that went bankrupt.
      In those days the liquidators did well because there were often assets. Most things are leased, rented and it would appear even debtors, so these companies have no assets.

    • Mira says:

      A while ago .. I began wondering how much of the money that “they” play with & lose is actually .. compulsory superannuation .. pension funds money .. etc.
      Pulling X% of workers waged doesn’t add up to the gazillions that are on the global casino table.
      What if it’s funny money ??
      Lots & lots of instant monopoly money .. addicted players play endlessly .. the drinks have to keep coming.
      Money on tap sounds like the mechanism that enables the game.

      • Mira says:

        Ages ago I read an article explaining a scientific theory .. I am not that thick that I don’t get stuff like that .. I read the article & it sounded brilliant .. only that I didn’t understand one word of what the guy was talking about.
        The first & only comment said “Wow, brilliant, man.”
        So I read the article again & again to work out what I didn’t understand.
        & The Penny dropped ..
        & I wrote “Great article .. better than the routine .. Who’s On First .. well done.”
        The guy was better than brilliant he was a master .. the article was a load of rubbish brilliantly written.

        • Mira says:

          I’m not talking about Nick’s article here .. there are persons out there that put the greatest thinks to shame .. & they are brilliant .. only that it is a load of rubbish .. but by the time U have worked it out U have lost your shit & all U’r worldly processions.

  10. polistra says:

    In simple terms, Greensill’s sole business is money laundering.

  11. Ogmios says:

    And thus it begins….

    • Trailer Trash says:

      I saw an article on CNN yesterday that said the Repo market was blowing up again. Must be getting to the point where no bank will lend to any other bank because no one knows who is holding the biggest bag of burning dog poo.

      • Lisa_Hooker says:

        This bag smells like the one Paulson/Bernake were holding in 2008.

      • Wolf Richter says:

        In the opposite direction. Instead of skyrocketing, repo rates plunged into the negative (meaning prices surged under huge demand).

        This time, if the Fed wants to jump in, it would have to SELL Treasury securities from its balance sheet into the repo market, rather than buy as it had done last time. And then watch the fireworks if the Fed starts selling Treasuries to calm the repo market!

  12. John says:

    Reminds me of mortgage back securities, with interest only loans. Then packaging them and selling them. Then using them as more collateral for more money. Credit default swaps in there somewhere?

  13. billytrip says:

    Another “business” model that is dumber than the crudest fiction.

  14. Old school says:

    I was thinking yesterday about how the protesters that stormed US Capitol buildings are facing really harsh 20 year plus sentences and the leaders of the Wall Street banks that blew up the world in the Great Financial Crisis didn’t get charged with anything. Penalties just aren’t that great if you commit financial fraud and can hire the best lawyers.

    • Bruce Walker says:

      I would change one word not the best Lawyers the crooked lawyers. easy to fix get Gina and her waterboardsWe have been waterboarding the wrong people.

    • Javert Chip says:

      Old School

      What I object to in your post is your apparent absolute certainty that something is “fraud” just because you say so.

      You (a non-lawyer layman) can run around all day claiming what “Wall Street does” is fraud, but until the laws and regulations get changed to define it (Wall Street’s admittedly unethical behavior) as fraud, IT ISN’T FRAUD.

      It’s difficult to put anybody (especially people able to afford good lawyers) in jail if you can’t even point to a statute they supposedly violated.

      • Wisdom Seeker says:

        Just because the law doesn’t say it’s wrong, doesn’t mean it’s right.

        When the banksters and their lobbyists own Congress, of course the laws will allow them to fleece the public. There actually was an abundance of outright fraud in 2006-2009, including rampant robosigning of fake mortgage documents. But on top of that there was the wholly legal financial rape of the nation in which the feds made the bankers whole at public expense. Obama (and Biden!) were the front men for that travesty of justice… don’t expect anything better in the next crash; in fact, that right there may be why Biden was installed.

        Bastiat nailed it nearly 2 centuries ago: “When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.””

        Wall Street’s legalized robberies are a form of plundering. When the plunderers can buy the lawmakers, the laws can no longer stop them. And when they also own the news media, they can glorify their work as well.

        • Javert Chip says:

          Wisdom Seeker

          “Just because the law doesn’t say it’s wrong, doesn’t mean it’s right”

          Your (above) statement is correct. That is why, in our society, we have elected officials (called legislators) to whom we’ve given the authority to pass laws proscribing certain behavior as illegal (along with associated penalties).

          If, as you appear to do, you simply accept that nobody can do anything about anything, we’re just a couple steps away from mob rule.

          One of the (many) problems with mobs is they frequently rule quickly (lynching, for example), but they are fickle, not to mention frequently wrong.

          Me? I’d prefer the slow-grinding legislature as opposed to the hot-tempered mob.

      • Old school says:

        Fraud is probably the wrong word. But we know that Paulson gathered a dozen or so big bankers in a room and made them take I think $25 billion each because a few of them had blew up the system because of fraudulent mortgage loans. We know the filings we’re done incorrectly using the Mers system as well.

        Interest rates were pegged at zero to allow banks to rebuild their balance sheets on the backs of savers. It’s a lot of bad behaviour for CEO bankers not to suffer loss of money or freedom.

        • Javert Chip says:

          Old School

          You are absolutely correct, and what percent of legislators (state & Federal) were voted out of office for failing to pass laws Both you & I strongly feel was what should have been illegal behavior?

          Answer: almost none.

          Back in 2005-6-7-8; my opinion was Citi Corp was a criminal organization and should have been “resolved” out of business. Wells Fargo’s recent behavior has certainly been criminal, and it, too should be “resolved” out of business.

          However, our “legislators” have recently been too busy chasing Russian collusion and impeachment du jour

    • Mira says:

      Someone need to think up a better incentive than .. “Oh yes indeed, we got the bad guys.”

      • Mira says:

        When I grow up I want to be ..
        To Catch a Thief .. the cat-burglar.
        How to Steal a Million Dollars .. the female thief played by Audrey Hepburn.
        Why ?
        The thrill .. The skill .. not at all or the loot.

  15. Satya Mardelli says:

    Receivables financing is usually the domain of predatory lenders preying on under-capitalized businesses who cannot get a normal line of credit.
    When large companies use receivables financing that’s a big red flag. If this financing is suddenly cut off they’re doomed. No bank will touch them and creditors (the accounts payable) will start slow paying the invoices. Think of it like a downward spiral. It never ends well.
    The bankruptcy courts are going to be busy.

    • CreditGB says:

      Having direct experience with receivable lenders, it is not only the transaction itself, but the internal costs, fees and restrictions involved. There are many prohibitions in these deals so as to further strangle the victim, a bit like a fly securely stuck in the spider web whilst the beast sucks the juices out of it.

      Under a radical change in executive management, we were large enough to voluntarily exit this arrangement after about 7 years of torture.

  16. Ron H says:

    Need some insights here, please. If Co. A sells payables (assume 45 days on average) does it not receive cash for those payables so that there is no net change in Co. A’s balance sheet or income statement other than a small fee of some sort. Does the problem occur if those payables are to affiliated companies? What is insured here? The purchased payables of Co. A? Or the securitization of the purchased payables of Cos. A,B,C, etc.? Sorry to appear ignorant

    • Wolf Richter says:

      Ron H

      To your point #1. A company that uses supply chain finance to raise money changes one type of a liability (trade payables) for another type of liability (financial debt), but doesn’t disclose it. Total liabilities are unchanged, but the actual financial debt is larger than the amount of financial debt disclosed on the balance sheet. This is a huge issue. Under accounting standards currently in place, companies do not have to disclose supply chain finance as financial debt. There are efforts underway to change this.

      “What is insured here”? Greensill created bonds backed by the payables that it had purchased, and then sold those bonds to investors (funds at Credit Suisse, etc.). To make these risky bonds more appealing, Greensill also purchased credit insurance on those bonds. The credit insurer refused to renew the credit insurance and let the policy lapse as of March 1. So suddenly, there is no credit insurance on any of these payables-backed bonds that Greensill had sold to investors.

      • Beardawg says:


        I did not even realize it was you summarizing – no box around your comment – I guess because this is Nick’s article. :-)

        This is a great “re-summary” of the scheme and helps the visual. I am in the business of Receivables Factoring and this still confused the H*** out of me.

      • Lisa_Hooker says:

        Sorta like finding out that your reserve parachute is empty due to a factory recall – after you’ve jumped from the plane.

    • jm says:

      Ron H
      I think you’re confusing payables with receivables (the I usual “factoring” target).
      In this case Greensill was paying out what the companies’ owed to their suppliers, quickly enough for the companies to get discounts for early payment, with the companies then being in debt to Greensill for the amounts paid out. In effect, borrowing from Greensill the money to pay suppliers, but still being able to put the amounts on their books as “accounts payable” rather than as debt.

  17. Brant Lee says:

    So when I thought I had paid my bills, the funds are actually sidelined and played in the markets? I suppose a whole industry is built around people paying their bills early. FREE MONEY!!

  18. John seddon says:

    Correction please. source FT and also Guardian newspaper. IAG sold its Australian brokerage business to Tokyo Marine in 1919.
    When the music stopped last weekend, the major losers were SoftBank and Tokyo Marine, plus HNW investors holding funds in a number of Credit Suisse funds. Major winner could be Gupta (Liberty ) as he has already stopped weekly repayments to Greensill last week (FT). His holdings in his family metals group are too opaque to understand what is owed to whom. He will try to,pay only cents in the dollar to the creditors. He has done it before and will do it again. He has truly screwed Greensill and their investor lenders. Caveat Emptor.

  19. Dan Romig says:

    Thank you Nick for that eye opening report.

    It sums up what is going on in our twisted new financial jungle of lies, thefts and deceits that run the corridors of power.

    I was not aware that there’s a business of collecting & packaging up company to company IOUs for payments needing to be made to balance out goods received, and selling these freaking IOUs to pension funds???

    I see it now, Guido, or in my Case Dan Bob, has a lunch bag full of names and amount owed by those named. Take the lunch bag to Wall Street, hand it over & get paid, and let Wall Street deal with it.

    Am I missing something here?

  20. Wolf Richter says:

    Full disclosure:

    On May 8, 2020, the day after we’d published Nick’s earlier piece on Greensill, I was contacted by the head of Global Communications and PR at Greensill, who urged me to retract some allegations in the article about one of the bonds Greensill had issued. And this being just a small website and not Reuters, from where the allegations came, we removed the paragraph since it wasn’t central to the story.

    Here’s the offending article minus the offending paragraph:

  21. c1ue says:

    This sure looks like a SPV – a la Enron and so forth – for Gupta.
    No wonder the German regulatory authorities are looking into it.
    And again – another example of poor Softbank due diligence.

    • Javert Chip says:


      Don’t get too comfortable that the (especially) German regulators are on the on the job here.

      Yea, they jump once stuff has blown up, but they also know damn well this is ingrained into the system and regulators are essentially doing zero to correct the systemic problem – requiring full financial disclosure of the change in liability type would be a good start.

  22. MonkeyBusiness says:

    SoftBrain might be a more apt name.

  23. Carlos Leiro says:

    Mr Wolf
    What abaout Opendoor Technologies Inc
    It is in San Francisco?

    • Javert Chip says:

      Carlos Leiro

      Here’s what you do:

      1) Go to Google (or even better, DuckDuckGo)

      2) Enter “is Opendoor Technologies Inc in San Francisco” in the search box

      3) Hit ENTER

      Presumably, you’ve already mastered not pooping in your shorts; mastering the above 3-steps will also keep you from embarrassing yourself in public.

  24. Petunia says:


    Since the markets resemble one giant crime scene, maybe you should rebrand your site, from the stories behind finance to the stories behind the biggest financial crime of all time. The killing of world financial markets.

  25. CreditGB says:

    Surprised that a unit of Softbank is having financial troubles. The group is headed by elite financial geniuses.

  26. Maximus Minimus says:

    Amazing. I wonder if Grensill kept a PowerPoint of all the interconnected schemes or kept it all in memory, which which must be ginormous.
    Since these schemes seem to be exposed more frequently because of the toxic monetary environment, will it impact business confidence in general?

  27. Olivier says:

    “[…] in contravention of rules forbidding local authorities from entrusting funds with private banks” This is truly baffling. Is there no supervision of what german municipalities do with their funds?

    • Javert Chip says:


      There are only 2 answers for your (Rhetorical?) question:

      1. No.

      2. WAHOO! Hah hah hah! Cough, cough, gasp. ARE YOU F(&%#$@G KIDDING? No way Jose!

  28. lisa2020 says:

    The German newspaper notes how many towns in Germany are at risk of total loss of all funds, some retirement institutional funds also. This involvement of Gupta with “private” and essentially undocumented/undisclosed sourcing of the funds leaves a lot of unanswered questions. Throw in connections with Softbank also leaves a further level of scale as to the “intent” of the strategic financing, and of course the subsequent “bankruptcies” as usual. I really question involvement with further UNK’s and since I don’t want to get murdered or threatened as some conspiracy theorist, I sure hope the Financial Times does do a valuable and revealing bit of investigative journalism for subscribers. Then maybe some truth will dribble out publicly. Of course I don’t think that JPM or GS or a few others are involved at all, really.

    • Javert Chip says:

      One of the many sad corollaries here is some of the German taxpayer loss will be made up by…wait for it…German taxpayers.

    • Old school says:

      If I am not mistaken pensions used to be funded by super safe sovereign bonds duration matched to when the payments are due. That was in the good old conservative thinking days. Pension funds today are basically designed to blow up in tail risk events in my opinion.

  29. Cashboy says:

    Just reading Wiki Greensill Capital – “History and business model” reveals the type of people that ran the company and their intentions from day one.

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