Greensill cites GFG loan “political managers”, research findings

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(Bloomberg) – Bankrupt lender Greensill Capital said it received “political instructions” that its loans to smelters controlled by Sanjeev Gupta and his family are welcome, an investigation by the State Audit Office showed.

According to a report released on Wednesday, representatives of the London-based company told officials at the UK state-owned British business bank that it was for this reason that Greensill lent so much money to the firms that make up Gupta’s GFG Alliance.

The British business bank gave Greensill the opportunity to issue 400 million pounds ($ 551 million) in loans guaranteed by the UK government as part of the pandemic relief program.

A total of £ 350 million has been made available to GFG Alliance member companies, including six loans totaling £ 300 million for one day in September 2020, the audit bureau said citing a British Business Bank survey.

Greensill crashed in March after one of its key partners refused to renew the vital trade credit insurance that secured loans to a number of borrowers. Greensill and Gupta’s closeness to the British government was then in the spotlight. There are at least 10 investigations and investigations in progress in this regard, some of which are related to lobbying and access to influential decision-makers in the British establishment.

In the midst of the pandemic last year, the UK government and British Business Bank launched emergency lending programs to support companies struggling with the effects of the lockdown.

Greensill has been an accredited lender through two of these programs: the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS). Greensill was CLBILS ‘fifth largest lender by value and accounted for 8% of total guaranteed loans, according to the audit bureau.

The investigation found that Greensill’s accreditation process for the programs generated “unusual” interest from the UK Department of Business, Energy and Industrial Strategy.

A department known as BEIS asked if Greensill could be allowed to lend more than £ 50 million to the borrower and asked to prioritize that decision, the audit bureau said in a report. Greensill was limited to this amount by the British Business Bank guarantee.

A BEIS spokesman said there was “no suggestion” that ministers or officials tried to influence the British Business Bank’s decision. According to him, all decisions are made by the bank independently.

However, the opposition Labor Party said the audit service’s report raises questions about government involvement. “The level of Greensill Capital’s access to ministers is deeply troubling,” said Sima Malhotra, a spokeswoman for the party’s business affairs. “Now the plot thickens with reports of rule violations and requests to speed up.”

Emails sent to British Business Bank confirmed that Liberty Steel, part of GFG, is lobbying the department to help Greensill provide funding, including offering Greensill an individual guarantee for lending to the steel conglomerate, the report said.

After review, the British Business Bank legal team concluded that Greensill’s accreditation was not affected by outside parties.

But in October, officials worried that Greensill might have breached the guarantee by lending too much money to GFG, and called several meetings. In early March, a few days before Greensill filed for bankruptcy, British Business Bank wrote a “letter of concern” to the lender and suspended its guarantees on its loans.

In total, Greensill provided eight loans under the program, seven of which were provided to GFG companies. Grant Thornton, the Greensill administration, told a British business bank in April that the bank is denying allegations of violating program terms, the report said.

Another loan was provided by Aar Tee Commodities Ltd. The British business bank noted that the owner of the company was previously a member of the board of directors of the GFG charitable foundation and the strategic council of GFG. The report said the bank sent Greensill another letter of concern over the loan.

The bank struggled to verify some of the information that Greensill provided it as part of its CBILS loan application, as the lender did not release its verified accounts at the time. The priority, the bank said, was to provide guarantees to lenders that could quickly and reliably deliver money to borrowers, rather than checking each institution before accepting it into the program.

“Unfortunately, it is clear that some of this mess could have been avoided with a more thorough pre-screening of Greensill,” Meg Hillier, MP and Chair of the State Accounts Committee, said in a separate statement. “There are important lessons for the government.”

(Updates detailing British Business Bank’s due diligence and quote from Meg Hillier after point 16)

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