On Monday 1st March, it was announced that Greensill Capital would collapse into administration after encountering severe financial difficulties with Grant Thornton being appointed as its administrators. This created a surge of chaos within the market with corporations wondering how their supply chains would be adversely affected amid a real concern about the possible loss of thousands of jobs worldwide in the midst of the COVID-19 pandemic.
Greensill is an independent financial services firm, known for being the market-leading provider of short-term supply chain financing for medium to large corporations. The company specialises in structuring trade finance, optimising working capital and contract monetisation.
According to Grant Thornton’s website, Trevor O’Sullivan, Chris Laverty and Will Stagg have been announced as joint administrators for Greensill. The crisis may put into jeopardy more than 50,000 jobs around the globe.
Greensill’s issues had already been snowballing for some time. Just last year, Bafin, a German regulatory firm, began to investigate Greensill’s partnership with Sanjeev Gupta, a steel magnate and one of Greensill’s biggest clients.
As one of Gupta’s main financial backers, Greensill was pivotal to the businessman’s rapid acquisition of several steelwork companies. Some say that Greensill’s demise was due to its work with Gupta’s network of companies. At the court hearing on Monday 8th March that led to Greensill’s administration, the company’s lawyers revealed that the collaboration with GFG Alliance, Gupta’s company, had caused Greensill’s current financial difficulties.
While the collapse of Greensill has caused a huge impact on the UK’s fintech sector, the main concern for the government at present is the immediate threat to jobs in the steelworks sector, particularly during the current ongoing pandemic. It is estimated that around 5,000 jobs are at risk within the steel industry alone, with an additional 2,000 more throughout connected supply chains in the UK.
A government spokesperson responded to this issue, stating; “The government has put together a far-reaching package of support to help businesses and workers through the coronavirus pandemic. We continue to regularly engage with businesses across all sectors, including those in the steel industry.”
Before Greensill’s collapse, the company sought advice from Citi, Credit Suisse and Allen & Overy as it chased private equity funding. As a further result of its business with Gupta, the company lost the insurance cover for high yield investments crucial to its business model.
In October 2020, just months before this recent news, the company set out to woo some of the world’s largest private investors. This fundraising effort and the way in which Greensill was operating – reaching out to any and all companies that would spare cash – was contradictory to statements previously made by CEO, Lex Greensill.
“Our DNA is that everything that we do must be profitable from day one, and our investment in the growth of our business is about using those profits as opposed to using equity to enable us to grow,”
It was reported that Softbank Group injected around $400 million into Greensill Capital at the end of 2020 with a further $1.5 billion investment from the Vision fund. As one of Greensill’s shareholders, this further deepened the losses of the Japanese tech investor and it is likely that Softbank will be wiped out by the collapse.
At the time of filing for administration, Greensill stated that its ability to pay back a $140 million loan to Credit Suisse had further contributed to its financial distress.
As a result of the collapse, the main concern for businesses close to Greensill is whether its work with supply chain financing will continue following its acquisition by Apollo Global Management. Even if it does continue, concerns remain as to whether banks and other financial institutions would trust the organisation and how long due diligence processes would take before the necessary funding was provided.
Many large corporations and governments have begun to search for alternative supply chain solutions with OCI Limited being one of the most sought after amongst them.
“Since the news broke about Greensill, our phones haven’t stopped ringing. We’ve had calls from Fortune 500 companies and large corporations that are keen for OCI’s support. It’s not just about the financing and the delivery of goods, the reputations of several companies are at risk.”
Oliver Chapman, CEO
About OCI
OCI is an agile organisation with expertise in purchasing, logistics and financing. The company offers end-to-end procurement solutions to corporates around the globe and has the financial infrastructure to bridge the funding void created by the Greensill collapse.
This revolutionary model has already enabled OCI to help several organisations to pay suppliers in advance and to offer flexible credit terms as required.
The company is rapidly lending its hand to the domestic and international sourcing of supplies, protecting those vendors who have been derailed by this shocking news.
For more information, please visit www.oci-group.co.uk or contact us on hello@oci-group.co.uk.