Greensill Capital relied on a handful of customers for much of its revenue, including a miner owned by the West Virginia governor, 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 Gov. Jim Justice, has borrowed about $ 850 million from Greensill, making it one of Greensill’s largest customers, Greensill̵
Representatives of Bluestone and the West Virginia governor’s office did not respond immediately to requests for comment.
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Greensill has long said it works with millions of customers, according to its website, many of whom are small suppliers to corporate customers and has partnerships with dozens of banks, insurers and companies.
But a handful of connections had become crucial to Greensill in recent years. For most of 2019, more than 90% of Greensill’s revenue comes from five customers, according to an internal Greensill report reviewed by the Journal. In 2020, this is about 70%, according to the report.
Other big customers are British steel tycoon Sandjeev Gupta and British wireless giant Vodafone Group PLC, according to some people.
Greensill was founded in 2011 by former banker Morgan Stanley and Citigroup Inc. Lex Greensill. It became embroiled in a crisis last week when Credit Suisse Group AG froze $ 10 billion in investment funds that Greensill relies on to fuel its business.
Greensill plans to file for bankruptcy in the coming days in the United Kingdom and is in talks to sell its current business to Apollo Global Management Inc., the newspaper reported, citing acquaintances. The sale will be part of its $ 4 billion peak in 2019.
Greensill loans are mostly short-term and some customers without access to cash will have to find alternative sources of financing in the coming weeks and months. Apollo, through an insurance subsidiary, is likely to fill the gap for some, but not all, Greensill customers, the paper said.
Greensill specializes in an area known as supply chain financing, a form of cash advance that allows companies to stretch the time to pay bills. Greensill packs these advance payments into bond securities. Credit Suisse’s funds were a major buyer of these securities, giving Greensill firepower to expand its business.
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Credit Suisse sells the funds to insurers and other professional investors, classifying them as relatively low-risk, according to the fund’s documents sent to investors.
In addition to Bluestone, Greensill’s other U.S. clients include several blue-chip companies and government agencies, according to documents sent to Credit Suisse to investors. More than half of Credit Suisse’s assets have been tied to U.S. clients since January, according to documents.
On Friday, Credit Suisse said it would liquidate the funds. According to the documents sent to the investors, Bluestone is among the companies in the Credit Suisse funds.
Mr Justice is the West Virginia billionaire governor who switched from Democratic to Republican in 2017. He owns several coal-related businesses in the region and has settled a number of lawsuits in recent years for alleged non-payment of bills, according to the court. records published by the investigative journalism website ProPublica.
Supply chain financing is almost always paid for in cash. But for a loan in 2018, the miner repaid Greensill in a combination of cash guarantees and guarantees. More than half of Greensill’s profit for 2018 is related to warrants worth $ 25 million, which entitles Greensill to own shares in the coal mining company, the newspaper reported earlier.
Last summer, Bluestone’s chief adviser told the Journal that the company has been working with Greensill since 2018 to improve its working capital position. Part of the fees she paid to Greensill this year with equity guarantees “were very soon after they were bought in full in cash,” he said, without elaborating.
Another important connection of Greensill was with Mr. Gupta and his group of companies GFG Alliance, according to acquaintances. German banking regulators have banned operations at a bank owned by Greensill after the audit failed to provide evidence of receivables purchased from the GFG Alliance, which owns steel mills and other industrial assets in a dozen countries.
A GFG spokesman said its operations were developing normally and that it was making progress in its discussions on securing funding from other financial institutions.
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Vodafone is a longtime customer of Greensill’s. A supply chain financing fund that Greensill created with GAM Holdings AG was referred to in both companies as “Vodafund” because Vodafone was both an investor in the fund and received funding from it, according to acquaintances and an email reviewed by the magazine.
According to the company’s spokesman, Vodafone is no longer an investor in the fund.
The newspaper reported on Friday that Greensill had used Credit Suisse’s funds to lend to two of its largest external partners, SoftBank Group Corp.’s Vision Fund. and General Atlantic.