Lex Greensill
portrayed himself as a savior for small business.
He started Greensill Capital to give the little guy a banking service mostly reserved for blue-chip companies: supply-chain finance, a type of cash advance that helps when payments are due from customers.
Mr. Greensill, the son of an Australian melon farmer, wanted to bring this helpful service to millions of smaller, less-established businesses. He planned to build a technology platform that would outrun bigger competitors such as
& Co. and
Citigroup Inc.
His world came crashing down this week when Greensill filed for bankruptcy, ensnaring a global network of borrowers—more than half of them in the U.S—as well as the firm’s financial backers,
SoftBank Group Corp.
,
and Japanese insurer
Small towns that kept deposits at Greensill’s German bank face losses on holdings they thought were safe. Investors in Credit Suisse supply-chain funds that invested in Greensill’s loans no longer have access to $10 billion in cash.
Behind Mr. Greensill’s failure: The business went beyond the scope of what it initially set out to do. Many of Greensill’s loans went to a small circle of borrowers close to Mr. Greensill, as well as acquaintances and his biggest outside backers.
A Wall Street Journal review of internal Greensill records, including board minutes and emails, along with interviews with more than a dozen people familiar with Greensill’s business, reveals how the company obscured its riskier loans behind a safe but barely profitable supply-chain finance business.
Greensill took on bigger, riskier long-term loans. In some cases, the loans were given other names before they were sold on to investors in the Credit Suisse funds, obscuring who the borrower was or the type of loan, the Journal found.
Documents indicate an acquaintance borrowed $30 million to invest in a New York skyscraper development. Mr. Greensill got into aircraft leasing, and after getting big slugs of cash from SoftBank and General Atlantic, he lent money back to them.
Mr….
Read More: Behind Greensill’s Collapse: Detour Into Risky Loans