Financial Services

German financial watchdog imposes moratorium on Greensill Bank

Greensill Capital prepares to file for insolvency in UK

Former UK prime minister David Cameron is an adviser to Greensill.

Wed Mar 3 2021 - 17:22

Germany's financial watchdog BaFin said on Wednesday that it had imposed a moratorium on Greensill Bank. The ban is for disposals and payments because "there is an imminent risk that the bank will become over-indebted," said BaFin. The watchdog also ordered the bank closed for business with customers. The bank, based in Bremen, Germany, is part of the British fund Greensill Capital.

“The moratorium had to be ordered to secure the assets in an orderly procedure,” BaFin said. Greensill wasn’t immediately available for comment.

A moratorium is an invasive tool to put the brakes on a financial institution that “faces insolvency or excessive indebtedness”, according to BaFin’s website

Meanwhile, Greensill Capital, the once high-flying financial company that counts former UK prime minister David Cameron as an adviser, is preparing to file for insolvency in the UK.

READ MORE

Sources said that the filing will allow private equity firm Apollo Global Management to buy parts of the business out of administration, in a “prepack” deal.

The $455 billion (€370bn) US private equity firm’s deal could wipe out shareholders such as SoftBank’s Vision Fund, which poured $1.5 billion into the business in 2019. SoftBank’s $100 billion technology fund has already substantially written down the value of its stake.

Greensill’s lawyers warned this week that the recent loss of a $4.6 billion insurance contract could cause a wave of defaults among its clients and 50,000 job losses. It said that some of these clients were “likely to become insolvent, defaulting on their existing facilities”, as their funding for working capital was removed.

Greensill Capital’s main financial product – supply-chain finance – is controversial, as critics have said it can be used to disguise mounting corporate borrowings.

While the bulk of Greensill’s business is based in London, its parent company is registered in the Australian city of Bundaberg, the hometown of its founder Lex Greensill, where the company is seeking relief from insolvency laws. – Copyright The Financial Times Limited 2021 and Reuters

LATEST STORIES