Greensill Bank has used government-backed loans from three European governments to reduce its positions in companies owned by metallurgical tycoon Sanjeev Gupta.
The diagram, described in documents reviewed by the Financial Times, highlights the potential taxpayer’s exposure to Gupta’s troubled business empire.
It also provides insight into the tactics Greensill Bank has used in trying to placate regulators worried about the risks associated with loans to Gupta’s GFG Alliance.
Supply chain financial group Greensill Capital took over in March, prompting international political and financial scandal… Lender’s ties to Gupta companies are currently in the spotlight crime investigation UK Serious Fraud Bureau at GFG.
Greensill’s Bremen banking division faced an increase last year pressure from German financial watchdog BaFin to reduce the volume of lending to GFG.
In response, Greensill Bank has developed a plan to use government guarantees provided as part of the Covid economic measures to offset its credit risk, according to a bank administrator’s report.
In late July 2020, Greensill Bank wrote to BaFin outlining a plan under which government-backed loans made to three GFG companies in France, Italy and the Czech Republic would be used as collateral for existing GFG bank loans, according to a report by the administrator of a German law firm. CMS Hasche Sigle Michael Frege.
The report explains that Greensill Bank’s credit risk for GFG will be passed on to the government. According to the administrator’s report, at the time of the Greensill collapse, the GFG companies owed their Bremen bank more than 2.8 billion euros.
GFG companies in France, Italy and the Czech Republic received four loans totaling € 190 million, with the respective governments providing guarantees of 80 or 90 percent of the value of the loans.
According to the report, lawyers working with the administrator are verifying the validity of loan guarantees.
The loans were in addition to the £ 400 million in taxpayer-backed loans provided to eight Gupta-related companies under the UK coronavirus-related business interruption loan scheme. The FT previously reported that Gupta restructured his business last year. to maximize the amount of loans secured by UK taxpayers he could get from the scheme.
In France, state-owned investment bank BPI supported two loans of € 17 million and € 10 million from Greensill Bank to Alvance Aluminum Group. Liberty Magona Srl, which is part of the GFG metallurgical production, received a loan of 86 million euros with the support of the Italian export credit agency Sace. Meanwhile, in the Czech Republic, the steel mill Liberty Ostrava received a loan of 76 million euros with the support of the export credit agency Egap.
The entire group was shocked by the collapse of Greensill, its largest creditor. GFG is now trying to refinance and pay off debt to creditors.
Greensill Bank management is under crime investigation on suspicion of balance sheet manipulation following a complaint from BaFin, which ordered a moratorium on the bank in early March. KPMG’s forensic examination revealed that Greensill Bank “was unable to provide evidence of a receivable on its balance sheet, which it acquired from GFG Alliance.”
GFG and Greensill declined to comment.