SoftBank-Backed Greensill Files For Insolvency, Apollo To Buy Ailing Business Parts: FT

SoftBank Group Corp (OTC: SFTBF) SFTBY-backed Greensill Capital has filed for administration being unable to repay a $140 million loan to Credit Suisse and hit by defaults from its key customer GFG Alliance, the Financial Times reports.

What Happened: Greensill lawyers appeared before a U.K. court on Monday to make way for the U.S. private equity group Apollo Global Management Inc APO to buy parts of the ailing business.

The court filing marked the latest stage of the unraveling of a SoftBank-backed company that had sought a $7 billion valuation last year, with operations extending from the U.K. to Australia.

Greensill was a supply-chain finance specialist, enabling businesses to borrow money to pay their suppliers.

The crisis was triggered by the company’s primary insurer’s refusal to renew a $4.6 billion contract and Credit Suisse’s $10 billion fund freeze linked to the firm, depriving it of an essential source of funding. The loss of the insurance contract led to the cash crunch.

Why It Matters: Greensill had about $5 billion of exposure to metals magnate Sanjeev Gupta’s GFG Alliance group of companies whose defaults due to financial difficulties made things worse for Greensill.

In the U.K., GFG is the third-largest steel producer, employing about 3,000 people, with a further 2,000 employed in engineering and manufacturing. Business secretary Kwasi Kwarteng held an emergency meeting on Sunday with Liberty Steel CEO Jon Ferriman. Union officials are yet to meet Gupta on Tuesday to seek assurances over the future of the businesses.

Greensill’s lawyers admitted its inability to repay Credit Suisse’s loan worth $140 million borrowed in October.

The court hearing elaborated on Apollo’s attempts to acquire viable parts of Greensill Capital that could not save shareholders, including SoftBank’s Vision Fund, which invested $1.5 billion into the company in 2019.

Apollo extended a $59.5 million cash offer for Greensill’s intellectual property and I.T. systems that would involve over 500 employees of its U.K. business, Greensill Capital Management Company. The U.S. group is the only credible bidder based on the documents. Apollo would reportedly not take on any financing for GFG.

Price action: SFTBF shares are higher by 6.82% at $95.26 on the last check Tuesday.