Greensill, a british-based financial service provider specialized in supply-chain finance, has disclosed its filing for insolvency in the U.K. amid a spectacular scandal. Founded in 2011, the SoftBank backed financial institute practiced a form of reversed debt factoring that has amounted into a complex web of obligations and liabilities.
While being perfectly legal, this business practice can also be used to disguise corporate over-indebtedness, based on the ability to declare de facto debt as “accounts payable” on the balance sheet.
After an Australian insurer of Greensill’s portfolios discontinued its insurance policy last summer and the german financial authority BaFin shut down Greensill’s banking operations in Bremen to protect private investors, the financial institute found itself in a precarious situation.
The central reason for this is, next to the default of various U.K. customers on loans, it’s overexposure to a single client, indian steel magnate Sanjeev Gupta. Greensill now hopes to avert a complete collapse through selling off its most attractive assets to the U.S. private equity firm Apollo Global Management.