The rapid history of the rise and fall of Greensil, the company that specializes in supply chain finance – or what is called in the jargon Factor Reverse– There are many similarities with other financial engineering experiments of the past – Mortgages Sub Prime Or junk, for example – like setting alarms among regulatory authorities. Doubts about a new “shadow bank”, if not adequately controlled, create doubts about potential systemic risk. In other words, an uncertainty that can create unexpected waves.
He did not find gunpowder in Lex Greens (44, Bundaberg, Australia), but like others before him, he believed he had found a way to exploit investors more and more profitably. Distribution chain finance has been operating in markets for decades. Basically, when a supplier sells to a large customer, they know that it will take considerable time to collect. The financial institution holds the invoice and pays less of the discount percentage on the amount associated with it. The company will then collect the full fee from the borrower customer. Everyone wins.
Greensill’s qualification is a combination of knowledge, courage and the ability to sell his own impressive personal story, moving from working on his father’s farm to a prominent position in Morgan Stanley and later developing his own company. It was the difficulties his father saw in selling cane sugar and watermelons from his customers that he repeated, which led to a return to a financial system that provided peace of mind for entrepreneurs. His best idea is to turn those supply loans into attractive bonds for mutual funds. Something similar to those junk mortgages that, until everything exploded in 2008, were fragmented and turned into a very lucrative financial product.
“One of the warnings raised by a company like Capital (and generally all distribution financing) in Greens is that these practices help companies hide their cash production potential and their capital from investors and lenders. [liquidez a corto plazo]”, Analyst Stephen Clubma points out in his blog Balance behind. This is because these types of activities are not reflected in the accounting balance of the company’s financial debt, but as accounts payable to suppliers. It may be due to a job, but also for future orders – financing future accounts payable, called the original tool – thus making it a quick and easy way to get capital. And dangerous. But is not subject to the regulation and scrutiny of other financial transactions.
Cute guy from Lex Greens Establishment UK, leading businessman Fintech From the United Kingdom, it received support and guarantees from the government, and in 2018 received the Knight Order of the British Empire from the hands of Prince Charles. The financier agreed with the compliments about a country that embarked on the uncertain Brexit adventure: “What can we do globally without the infrastructure provided by the United Kingdom? We have already voted with our feet and we hope others will follow our example, ”he told Bloomberg TV a year ago in Greens, explaining the reason for his decision to turn London into the company’s operating base. 2.3 million customers in 165 countries. Complex engineering operations at the speed of electronic excitation; It has nothing to do with the bank’s traditional attendance and paper work. As reflected in the merger of the company as an adviser to former British Prime Minister David Cameron, another “disruptive” actor called for changing the meaning of a traditional market, with important contacts. Perfect for opening some doors.
It was so sexy in the greens. U.S. Investment Fund General Atlantic invested $ 250 million in the company in 2018. One year later, the Japanese energy, technology and finance company Softbank invested another $ 800 million in the company’s capital through your investment fund Vision Fund. Investors flocked to the glamor of a promising product, and their share was sent through the Swiss investment firm GAM and Credit Suisse Funds. The bank has formed an alliance with an Australian businessman to pave the way for Greensil’s complex financial products of up to $ 10 billion from its customers.
In 2016, the company brushed the edge. The failed companies piled up and suffered a $ 54 million loss in Greens. Amount more than your income, ten times more than the previous year’s losses.
The savings of an Australian financier will be his punishment for a long time. Sanjeev Gupta, the ‘British steel baron’ who took over most of this declining industry by employing 35,000 workers through his company Liberty House – in the UK and around the world, saw the opportunity to finance their businesses in Greens. Through GAM he created a triangle of mutual benefits in which Gupta received funds through distribution contracts with companies in his own company, sending that money to the same companies and earning the bulk of the revenue at Greens through his obligations. When investors became skeptical and withdrew their stake in the fund, Credit Suisse began to repay their freeze and GAM, alerting the authorities in Greens: he transferred the bulk of the debt of the steel companies to the industrially created bank, the bank in Greens and this company Tried to repay the money demanded.
Germany’s Federal Financial Oversight Commission, known by its acronym Baffin, has opened a criminal investigation. Greens has announced it has stopped making payments. Thousands of companies and their workers have entered a period of uncertainty depending on the initial cash flow plan offered by the company. Starting at the Liberty House, its problems are also an issue for the British government. David Cameron with the extra corruption of his dubious role as a facilitator and guarantor to his Australian friend. “You’re killing my reputation,” Lex Greens replied Financial Times, A research-focused newspaper uncovering another miracle of financial creativity has emerged as a new pyramid scheme in which everyone rushed to invest without understanding where they are doing it.