Lex Greensill.
Lex Greensill.

‘Goodbye’: How high-flying billionaire came crashing down

Late on Monday evening, UK-time, Lex Greensill - the Bundaberg farmer turned global financier - hosted a call with his global staff of more than 1000, at the end of which, his message was clear: "Goodbye".

With that one simple word, Mr Greensill farewelled his global empire - worth an estimated $7bn before it collapsed, entering voluntary administration on Tuesday morning.

Before the call, Mr Greensill had filed for administration stating it was in "severe financial distress" and unable to repay a $140m loan to Credit Suisse, following "defaults" from its key customer Sanjeev Gupta's GFG Alliance.

For much of the past year, Mr Greensill, who was made a Commander of the British Empire for services to the economy in 2017, had been holed up in his renovated vicarage at Saughall, in rural Cheshire. There, he witnessed the implosion of his eponymous company.

In November, Greensill Capital sold its fleet of four private jets - a Dassault Falcon, Gulfstream 650 and two Piaggios - as it looked to raise fresh capital from investors, following several of its clients facing financial difficulties and his favourite Swiss investment bank mired in a conflict of interest controversy.

The sale of the jets, seen as the epitome of Greensill's stellar rise from its founding in 2011, was now a sign of a company in free fall and contrary to Mr Greensill's bold plans he had for the company at the start of the year.

In January 2020, Greensill was considering a sharemarket float and preparing to launch its wages-on-demand offering. Mr Greensill was also estimated to be worth more than $2bn, with his stake in the company comprising most of his fortune, as well as a $150m property portfolio, which included his family's farm in Bundaberg.

In December last year, he was still clinging to plans of a Greensill float, telling The Australian that while no specific date has been chosen for an IPO, but "within the next two years is likely".

The company had also closed its books on December 31 with just under $1bn in revenue for 2020, up from more than $600m last year.

A torturous year

But 2020 was a torturous year for Greensill, leaving its mark.

As early as late January, Greensill dream run hit roadblocks, with The Australian exposing how Greensill's platform was being used to squeeze small suppliers. Some of its biggest clients were using the platform to blow out payment times beyond the standard 30 days, charging small businesses if they wanted to be paid on time.

Following the revelations published in The Australian, Greensill clients, including Telstra and construction giant CIMIC, dramatically began scaling back their supply chain financing offerings. TPG exited from the platform all together, while other companies became increasingly wary of the practice.

Greensill went on a PR charm offensive, declaring it would tear up its contracts with clients who used its platform to push out payment times beyond 30 days, which was a strong enough threat to pull CIMIC into line and earned praise from federal Small Business Ombudsman Kate Carnell.

Mr Greensill also announced that he would give UK National Health Service workers free access to the company's wages-on-demand service via its Earnd app, describing it as a "free cup of tea".

'Like payday lending'

The company also hoped to roll out the service across the Australian public sector and tap into the Commonwealth's AAA credit rating. But former finance minister Mathias Cormann dismissed the idea after Mr Greensill pitched it to him on the sidelines of last year's World Economic Forum at Davos and Department of Finance officials described the service as being "economically similar to payday lending" in a briefing document.

Mr Greensill bridled at the suggestion his company was akin to a payday lender, telling The Australian last December that "we waived all of the fees that had been commercially negotiated for employees to pay and we made it free for everybody".

"I'm not sure how being able to be paid for free every day is economically similar to payday lending."

Greensill Bank offices in Bremen, Germany. Picture: Bloomberg
Greensill Bank offices in Bremen, Germany. Picture: Bloomberg

Gupta ties

But it was Greensill's relationship with controversial steel baron Sanjeev Gupta's GFG Alliance that hit the company the hardest.

Greensill financed GFG's acquisition of a string of global assets, including bankrolling the €740m ($1.14bn) acquisition of ArcelorMittal's struggling European steel mills by Mr Gupta's Liberty Delta in 2019. Mr Gupta's fortune has remained a mystery, with the British businessmen yet to appear on any of the global rich lists.

In March last year, The Sunday Times in London also reported that Greensill was understood to have used an "exotic form of financing" - extending Liberty the cash based on "future receivables" stretching up to three years into the future.

"As the steel industry's struggles deepen and the market meltdown continues, Mr Gupta's debt-fuelled vision will be tested. A City source said: "Supply-chain finance is like a machine gun. In the hands of a three-year-old, it's a disaster. In hands of the SAS, it's fantastic. Sanjeev is the three-year-old and Lex is like the arms dealer giving it to him," The Sunday Times reported.

Greensill's main insurer cut a $4.6bn policy last week as it grew uncomfortable over its exposure, triggering Credit Suisse to wind down $US10bn of funds invested in loans arranged by the financier.

Now Grant Thornton has been charged with performing the corporate autopsy of Greensill, with hopes that part of the business can be salvaged.

Chris Laverty, Trevor O'Sullivan and Will Stagg of Grant Thornton have been appointed as joint administrators of Greensill's UK operations (GCUK). Meanwhile Matt Byrnes, Phil Campbell-Wilson, and Michael McCann, also of Grant Thornton, have been appointed the voluntary administrators in Australia.

"The joint administrators are in continued discussion with an interested party in relation to the purchase of certain Greensill Capital assets. As these discussions remain ongoing, it would be inappropriate to comment further at this time," the administrators said.

Mr Byrnes said: "we are working closely with the UK administrators in relation to next steps in the administration process".

"We are not able to comment on any individual customer's position at this stage. GCUK, as the provider of finance for the Greensill Group via its supply-chain finance working capital products, is insolvent and is now in administration. The UK administrators will write to creditors with an update shortly."

The administrators of Greensill Capital in Australia will convene the initial meeting of creditors within eight business days.

Originally published as 'Goodbye': How high-flying billionaire came crashing down