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Greensill Capital relied on a handful of customers for large portions of its revenue, including a coal miner owned by the governor of West Virginia, according to people familiar with Greensill’s operations and documents reviewed by The Wall Street Journal.
Bluestone Resources Inc., a coal mining company owned by West Virginia Governor Jim Justice, has borrowed about $ 850 million from Greensill, making it one of Greensill’s largest customers, said people familiar with the operations of Greensill. Greensill.
Representatives for Bluestone and the West Virginia governor’s office did not immediately respond to requests for comment.
GREENSILL CAPITAL FACES POSSIBLE INSOLVENCY AFTER CREDIT SUISSE SUSPENDS INVESTMENT FUNDS: WSJ
Greensill has long said that he works with millions of customers, according to his website, many of them small suppliers to corporate customers, and has partnerships with dozens of banks, insurance companies and companies.
But a handful of relationships have become crucial to Greensill in recent years. During most of 2019, more than 90% of Greensill’s revenue came from five customers, according to an internal Greensill report reviewed by the Journal. In 2020, it was about 70%, according to the report.
Greensill Capital relied on a handful of customers for large portions of its revenue, including a coal miner owned by the governor of West Virginia, according to people familiar with Greensill’s operations and documents reviewed by the Wall Street Jour
Other big customers include UK steel tycoon Sanjeev Gupta and British wireless giant Vodafone Group PLC, according to some of the people.
Greensill was founded in 2011 by former banker of Morgan Stanley and Citigroup Inc. Lex Greensill. It got into a crisis last week when Credit Suisse Group AG froze $ 10 billion in investment funds that Greensill depended on to supply its business.
Greensill plans to file for insolvency in the coming days in the UK and is in talks to sell his operational business to Apollo Global Management Inc., the Journal reported, citing people familiar with the matter. The sale would be for a fraction of its $ 4 billion peak valuation in 2019.
Greensill’s loans were mostly short-term, and some customers without access to cash will need to find alternative sources of finance in the coming weeks and months. Apollo, through an affiliated insurer, is likely to fill the gap for some, but not all, Greensill’s customers, the Journal reported.
Greensill specializes in an area known as supply chain finance, a form of cash advance that allows companies to stretch the time to pay the bills. Greensill packed these cash advances into bond-like bonds. Credit Suisse’s funds were a major buyer of these bonds, giving Greensill the firepower to expand its business.
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Credit Suisse sold the funds to insurers and other professional investors, classifying them as relatively low risk, according to fund documents sent to investors.
In addition to Bluestone, Greensill’s other customers in the U.S. included several top-tier companies and state government agencies, according to documents Credit Suisse sent investors. More than half of the assets in Credit Suisse’s funds were linked to customers in the United States as of January, according to the documents.
On Friday, Credit Suisse said it would liquidate the funds. Bluestone was among the companies that make up Credit Suisse’s funds, according to documents sent to investors.
Mr. Justice is the billionaire governor of West Virginia who switched from Democratic to Republican in 2017. He owns several coal-related businesses in the region and has resolved several cases in recent years for alleged non-payment of bills, according to court records published by the investigative journalism website ProPublica.
Supply chain financing is almost always paid in cash. But, for a loan in 2018, the coal miner repaid Greensill in a combination of cash and stock guarantees. More than half of Greensill’s profit in 2018 was tied in $ 25 million in guarantees that gave Greensill the right to own shares in the coal mining company, the Journal previously reported.
Last summer, Bluestone’s general counsel told the Journal that the company had been working with Greensill since 2018 to improve its working capital position. The portion of the fees she paid Greensill that year on stock guarantees “was soon redeemed entirely in cash,” he said, without specifying further.
Another crucial relationship for Greensill has been with Mr. Gupta and his group of companies GFG Alliance, according to people familiar with the matter. German bank regulators have banned activity at a bank owned by Greensill after an audit failed to provide evidence of accounts receivable purchased from the GFG Alliance, which has steelmakers and other industrial assets in a dozen countries.
A spokesman for GFG said its operations are functioning normally and that it is progressing in discussions to obtain financing from other financial institutions.
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Vodafone is a longtime customer of Greensill’s. A supply chain finance fund that Greensill created with GAM Holdings AG was referred to within both companies as “Vodafund” because Vodafone was an investor in the fund and received financing from it, according to people familiar with the relationship and a e-mail reviewed by the newspaper.
Vodafone is no longer an investor in the fund, according to the company’s spokesman.
The Journal reported on Friday that Greensill used Credit Suisse’s funds to lend to two of its largest external financiers, the Vision Fund of SoftBank Group Corp. and General Atlantic.