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SoftBank-Backed Greensill Looks to Raise Fresh Capital

10/08/2020 | 01:34pm

By Julie Steinberg and Duncan Mavin

LONDON -- SoftBank Group Corp.-backed Greensill Capital, a provider of specialty finance that helps companies manage cash, said it is asking investors for fresh capital to bolster its balance sheet.

The move comes after several Greensill clients hit financial troubles, partner companies loosened ties with the firm and its banking arm came under scrutiny from regulators, according to filings and people familiar with the matter.

A company spokesperson said the fundraising efforts emerge from a position of strength amid booming demand for its financing tools during the coronavirus pandemic, which help companies stretch payment terms with suppliers.

The company pointed to an increase in assets in Greensill-linked investment funds and said its client base has grown during the pandemic.

Founded in 2011 and advised by former U.K. Prime Minister David Cameron, closely held Greensill provides what is known as supply-chain financing. Greensill pays a company's suppliers faster than normal and at a discount to the invoiced amount. The company then repays Greensill later, allowing the company to conserve cash for a longer period.

The supply-chain world took off after the 2009 financial crisis and is prized by some companies for creating financial flexibility. It has also attracted notice from the U.S. Securities and Exchange Commission and ratings firms for its potential to disguise a company's level of debt.

Greensill, founded by Australian banker Lex Greensill, attracted backing from private-equity firm General Atlantic, which invested $250 million in 2018, and SoftBank's Vision Fund, which invested nearly $1.5 billion last year. Both companies declined to comment on the possible fundraising.

Greensill aims to raise funds that could value the company at about $7 billion, the spokesperson said, double the valuation it achieved in a funding round in October 2019. It is early in the process, however, and valuation targets often fluctuate during rounds of discussions with investors.

Greensill declined to say how much money it planned to raise. The company provided $143 billion of financing to companies in 2019, according to its website.

While Greensill says business is strong, several companies that use Greensill's financing have run into difficulties. Singapore commodities trader Agritrade International (PTE) Ltd. and U.K.-listed NMC Health PLC both collapsed. U.K.-based rent-to-own business Brighthouse Ltd. filed for restructuring earlier this year.

A Greensill spokesperson said credit insurance was in place for each of these companies.

Meanwhile, German banking regulator BaFin and the Association of German Banks, an industry group, are probing Greensill Bank, a German lender owned by Greensill, according to a person familiar with the matter. Authorities are concerned about the bank's exposure to a single client: U.K.-based steel magnate Sanjeev Gupta.

Mr. Gupta is a former Greensill shareholder who heads the GFG Alliance group of companies. A report from Scope Ratings last year said that about two-thirds of the bank's loan book was linked to Mr. Gupta's businesses.

The Greensill spokesperson said the company has regular dialogue with German regulators, and said the bank's exposure to Mr. Gupta's companies is "significantly lower" now than at the time the report was released.

Three firms that do business with Greensill or backstop its deals have recently scaled back their relationships, according to people familiar with the matter.

Euler Hermes was one of Greensill's biggest providers of trade credit insurance on its deals. During recent renewal negotiations, Euler proposed to raise the excess, similar to a deductible, on Greensill's policy, according to people familiar with the matter. This would reduce the amount Greensill would receive in the event of a claim.

Greensill, which had filed one claim in the last three years on the policy, rejected the terms and opted to replace Euler with other insurers, a Greensill spokesperson said, declining to name them. The claim was related to NMC, according to a person familiar with the claim.

Greensill packages supply-chain financing deals into investible products. Some of those products, which are akin to bonds, sit in a nearly $6 billion Credit Suisse-managed fund. The fund is marketed to investors as a secure source of income protected by trade credit insurance. Euler was one of the biggest insurance providers to the fund, according to a recent Credit Suisse letter sent to fund investors viewed by the Journal. Spokespeople for Credit Suisse and Greensill said the fund is fully insured.

Earlier this year, Credit Suisse Group AG investigated four multibillion-dollar funds it runs with Greensill. Executives at the Swiss bank were concerned about potential conflicts of interest after SoftBank invested $700 million into one of the funds, while the fund also made loans to other Vision Fund companies. SoftBank ultimately redeemed its stake and the bank said it would take steps to protect investors.

Credit Suisse is advising Greensill on the current fundraising plans, said a person familiar with the matter.

Italian-banking giant UniCredit SpA decided in recent months not to participate in any new deals underpinned by assets sourced by Greensill, according to people familiar with the bank's decision. Banks often share the risk on supply-chain finance deals, which can be syndicated like loans.

UniCredit became concerned about recent media coverage of Greensill's business practices in recent months, one of the people said. A Greensill spokesperson said it values its continuing relationship with UniCredit and that it works with dozens of banks globally, including several that it has added this year.

Taulia provides a technology platform for processing invoices, a crucial cog in the supply-chain finance industry. Last December, Taulia let expire an exclusive relationship it had with Greensill to finance transactions.

Taulia's clients became concerned about Greensill's media coverage and asked for non-Greensill financing options, according to people familiar with the companies' relationship. Taulia added JPMorgan Chase & Co., UniCredit and others to the platform, though it still does business with Greensill.

A Greensill spokesperson said it continues to have a continuing relationship with Taulia and that it shares a number of clients.

Write to Julie Steinberg at julie.steinberg@wsj.com and Duncan Mavin at duncan.mavin@wsj.com

(END) Dow Jones Newswires

10-08-20 1233ET

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