Greensill Capital, a supply chain finance firm based in London, is discussing a possible insolvency within days, according to a Bloomberg report.
The possible move follows the decision by Credit Suisse Group AG to freeze $10 billion worth of supply-chain finance funds that Greensill relies on, citing “considerable uncertainty” on the valuations of the holdings.
Concurrent to insolvency discussions, Greensill is considering the sale of its operating business to Apollo Global Management Inc. for $100 million, according to the report.
Along with the freeze from Credit Suisse, SoftBank Group Corp.’s Vision Fund wrote down $1.5 billion of its holding with Greensill Capital and has recently considered dropping its valuation of the firm close to zero. The report said the write-down occurred at the end of 2020.
Lex Greensill, founder and chief executive officer of Greensill Capital, has been viewed as an aggressive risk taker and has been criticized for his supply chain finance firm in the past.
In traditional factoring methods, suppliers can be paid faster by selling receivables to a third party at a discount. Greensill’s reverse factoring model helps the buyer instead of the supplier do the borrowing. Issues arise when it comes to classifying debt, as ordering companies do not have to contribute these transactions to their net debt, allowing them to increase their leverage without having to acknowledge it on financial reporting.
Last year, the German Federal Financial Supervisory Authority (BaFin) pushed Greensill to reduce concentration of risk on its balance sheet after finding this reverse factoring method along with securities reportedly linked to U.K. industrialist Snajeev Gupta, contributed to the 2018 demise of GAM Holding AG.
Amid these controversies,Greensill reportedly considered a capital raise in October that would have valued it at $7 billion and stated the funds would be used to help boost growth.
“Greensill acknowledges the decision by Credit Suisse to temporarily gate the two supply chain finance funds dealing in Greensill-sourced assets. We remain in advanced talks with potential outside investors in our company and hope to be able to update further on that process imminently,” a spokesperson for the firm said in a reported email to Bloomberg.