Telstra, construction giant CIMIC and the steelmaking town of Whyalla have all been swept up in the high-speed collapse of Australian farmer-turned-financier Lex Greensill’s global empire.
But the local blue-chip firms on the hook for tens of millions of dollars worth of unpaid invoices have insisted it’s business as usual, distancing themselves from the Greensill operation and stressing there is no danger to their suppliers, or risk that they will not pay their bills.
“There is no financial risk to Telstra, or our suppliers, from this situation,” a Telstra spokesman said. A CIMIC spokeswoman declined to comment but it’s understood there is no risk to its suppliers.
Greensill Capital spectacularly imploded last week after Swiss bank Credit Suisse froze four investment funds that had purchased $US10 billion ($A13 billion) worth of the troubled lender’s debt packages.
The bombshell move – triggered by a lapse in insurance policies covering some $US4.6 billion ($A6 billion) in assets – kicked off an explosive chain of events that now sees the 44-year-old scrambling to sell off “large parts” of the business to US private equity firm Apollo Global Management, after which the company will reportedly file for insolvency.
As the Bundaberg farmer now faces a media, political and regulatory firestorm digging into how the wheels fell off, attention has turned to the former clients whose IOUs could soon be in the hands of banks and insurers chasing payment.
Lawyers for Greensills told the NSW Supreme Court last month that, should the firm’s insurers refuse to extend coverage past March 1, more than 50,000 jobs could be at risk, including more than 7000 in Australia.
Credit Suisse on Friday announced that it would be liquidating its four supply chain finance funds and would return the money to around 1000 investors, starting this week with about $US3.7 billion ($A4.8 billion) in cash and equivalents.
Greensill’s business model involved effectively lending money to large companies like Telstra by paying their bills to suppliers early in exchange for a discount, and then collecting the full amount from Telstra at an agreed point in the future.
But Greensill put a further twist on the model by taking those payment agreements with its clients, chopping them up and packaging them into financial products which it sold to Credit Suisse and fellow Swiss asset manager GAM Holding.
The investment banks purchased Greensill’s “securitised” debt packages and in turn sold them to pensions, rich clients and others desperately seeking yield in a low-interest rate environment.
This was Greensill’s main source of funding.
Greensill purchased some $A143 billion worth of invoices from suppliers last year.
The Australian Financial Review reported on Monday that Telstra-backed receivables accounted for 3.09 per cent of the $US300 million ($A390 million) in…
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