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Greensill Starts U.K. Insolvency Process as Talks Continue

This content was published on March 3, 2021 - 10:48

(Bloomberg) -- Greensill Capital is in the process of filing for insolvency in the U.K. after a swift crisis of confidence deprived it of major buyers of the loans it made and regulators stepped in to oversee its German bank.

The firm is planning to go ahead with an insolvency filing as it pursues a sale of the company, according to people familiar with the matter, who asked not to be identified because the deliberations are private. The firm is continuing talks with the combination of Athene Holding Ltd. and Apollo Global Management Inc. to sell its operating business, the people said.

Lex Greensill’s effort to disrupt a niche part of global finance was derailed when credit insurance backing some of his firm’s loans lapsed, triggering uncertainty about their value and forcing Credit Suisse Group AG to freeze a client fund that bought the debt. German financial regulator BaFin appointed a special representative to oversee day-to-day operations of Greensill Bank AG after raising concerns about the concentration of its loans, and is close to freezing payments in and out of the banking unit, people briefed on the matter said.

Greensill said Tuesday it had entered a “period of exclusivity with a leading global financial institution with a view to concluding a transaction with them this week.” Any deal is expected to include “large parts of Greensill’s business and its assets under management,” the company said in a statement. It didn’t identify the potential buyer.

Earlier Tuesday, GAM Holding AG said it will start winding down a fund that invests in loans sourced by Greensill. That came a day after Credit Suisse froze a group of supply-chain-finance funds that it ran with help from the Australian financier, citing “considerable uncertainty” about the valuations of some of the holdings.

Bond and Credit Company, an Australian division of Tokio Marine Holdings Inc., didn’t renew trade credit insurance on some holdings in the Credit Suisse funds on March 1, according to documents lodged in a court in Sydney. Without the insurance backing up the loans, valuing the securities became difficult and the funds closed to redemptions as a result, according to people briefed on the matter.

The freezes on about $11 billion worth of funds deprived Greensill of large buyers for his assets at the same time as regulators in Germany put pressure on his bank to diversify its holdings.

GAM, which has been working with Greensill for about the past five years, was prompted to take action after a major investor asked for their money back, people familiar said. In order to treat investors fairly, GAM decided to wind down the funds and return capital to investors rather than just to the one client. In contrast to Credit Suisse, the firm said there were no concerns regarding the valuation of the assets.

Apollo and Athene may provide funding for loans as part of any deal, and may look to exclude any assets they deem too risky, one of the people said. Athene is a Bermuda-based annuity seller that’s part-owned by Apollo.

Greensill’s fall from grace has been swift: as recently as late last year, the firm was talking up its growth plans, seeking a valuation of $7 billion and eventually planning to go public.

A spokesperson for New York-based Apollo declined to comment.

“While the structure of the new business is still being determined, we expect the transaction will ensure the majority of Greensill clients will continue to be funded in the same way as they currently are while also preserving a substantial number of jobs,” Greensill said in the statement.

(Adds GAM decision in 8th paragraph)

©2021 Bloomberg L.P.

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