Teetering financial services house Greensill Capital has capped off an extraordinary week of bad news with revelations that it waited until only recently to tell its financial backer Credit Suisse it had no insurance for over $US4.6 billion ($5.9bn) worth of assets.
A senior source at Credit Suisse told The Age and The Sydney Morning Herald the bank had not been told by Greensill about its long running insurance issues despite the Swiss lender running a series of funds covering $10 billion of the supply chain group’s assets.
Lex Greensill’s financial empire has imploded spectacularly in the space of a week.Credit:Peter Braig
Credit Suisse assured investors in the fund that the assets were fully insured by A-grade insurers as recently as January 29, according to fund documents seen by The Age and The Sydney Morning Herald.
“The underlying credit risk of the notes is insured by highly rated insurance companies,†the updated investor note for the CS (Lux) Supply Chain Finance Fund states.
Credit Suisse also acted as one of Greensill’s financial advisers during a roadshow for its planned initial public offering in October, which would have valued the group at $US7 billion ($9bn). However, the bank was unaware at the time that Greensill had already been formally notified its insurance would not be renewed, sources said. Greensill was contacted for comment.
The depth of the Anglo-Australian supply chain financier’s insurance, customer and funding issues have rocked its main financial backer Credit Suisse which froze a suite of Greensill-related funds this week and forced Greensill to seek protection under Australian insolvency laws.
Greensill’s looming insurance scandal has now also embroiled IAG after the supply chain financier launched court action against its insurers over the cancellation of its policies.
On Friday, in a further blow for the flailing Greensill, one the group’s biggest customers – billionaire steel tycoon Sanjeev Gupta’s GFG Alliance – reportedly stopped making payments to Greensill. GFG is a group of companies tied to Mr Gupta that hold a vast array of assets including the Whyalla steel mill. GFG declined to comment.
Greensill, which was founded in Bundaberg in 2011, is expected to shortly announce a sale of the majority of its business to US group Apollo Asset Management.
