On 11 January 2020, the Chinese government alerted officials at the World Health Organization that a sixty-one-year-old man in the city of Wuhan had died from a mysterious new type of viral pneumonia. Over the next few weeks, the coronavirus rippled across the globe. By mid-February, airlines had isolated China and other hotspots, Italy was in the grip of a national lockdown, and governments around the world had convened their own emergency taskforces.
The pandemic rattled financial markets. How would trade cope with unprecedented restrictions on movement? How would the global economy survive as countries locked down their people? How much would companies suffer if their suppliers could no longer send them raw materials and their customers and staff could not go to work?
Investors were scared. Uncertainty reigned. Equity and bond markets were taking a beating.
At Greensill, there was fear – and an opportunity. The fears were that investors might look at the Credit Suisse funds and prefer to have their wealth in cash; that no one would need trade finance if trade dried up; that trade credit insurance companies would stop writing insurance policies if they were faced with a wave of defaults; that clients who had borrowed billions of dollars would not survive the meltdown. GFG’s steel business, Bluestone’s coal business and a host of others to whom Lex had loaned other people’s money would surely suffer as the global economy ground to a halt.
But there was great opportunity bubbling up too. Politicians were being faced with dire predictions about the impact of lockdowns – many businesses relied on complex, protracted supply chains, and many of them had not set aside enough cash to survive for more than a few months. By early March, governments everywhere were planning emergency measures to bail out businesses, keep cash moving through the system, and provide guarantees that would keep key sectors alive. Record stimulus packages were passed in record time. Government loans and state guarantees were everywhere.
For Greensill, the moment had turned from existential crisis – billions of dollars rapidly yanked from the Credit Suisse funds, potentially exposing that money had been loaned to borrowers who couldn’t pay it back – to a not-to-be-missed opportunity of the decade. Lex was already desperate to diversify his sources of funding beyond Greensill Bank – which was being scrutinized by BaFin – and Credit Suisse. There was no better funding partner than the government.
There was a similar dynamic playing out in the market for trade credit insurance. In April, the German government agreed to guarantee up to €30 billion in trade credit insurance. Other governments announced similar measures.
Inside Greensill, senior managers knew that this shift, this opportunity was what Lex wanted them to focus on. He told staff, confidently, that the Bank of England and HM Treasury were ready to provide funding.
IN THE UK that hectic and fear-filled spring, Chancellor Rishi Sunak announced the government’s Coronavirus Business Interruption Loan Scheme (CBILS). The loans were intended to support small and medium-sized businesses that were struggling to make ends meet as the economic effects of the pandemic hit home. He then announced a similar plan for large businesses (CLBILS). The loans would help see them through a few months. Accredited lenders that distributed the loans would get a government guarantee: if the client did not pay it back, the government would repay up to 80 per cent. The loans would be administered by the British Business Bank, a state-owned economic development bank.
The Bank of England also unveiled a Covid-19 Corporate Financing Facility (CCFF), which would buy short-term securities from companies that made ‘a material contribution to economic activity in the UK’ and were in sound financial health prior to the pandemic. It was an alternative way to achieve a similar outcome.
Up until now, David Cameron’s role at Greensill had been largely ornamental. He had helped open some doors in the Middle East and Asia. He gave Greensill the veneer of credibility in front of big clients. And he entertained Greensill’s board and senior management at company meetings with tales from inside the corridors of power. He even asked somewhat probing questions at board meetings – not a deep, sophisticated interrogation on financial issues, but he did push for answers about how the company worked. Given his lucrative pay packet, some senior executives privately discussed whether Cameron really added enough value to offset the considerable cost of having him on staff.
When Covid-19 struck, it was Cameron’s time to prove his worth. From as early as March, and for months thereafter, Lex hit Cameron with a barrage of text messages, urging the former PM to pull strings in Whitehall and at the Bank of England to get Greensill access to the suite of government bailout schemes. This intense lobbying, directed by Lex, was happening as the UK hit the depths of the Covid-19 pandemic, much of it when Prime Minister Boris Johnson was himself hospitalized with the disease. While the rest of us were thinking about how we might get through the lockdown and the worst healthcare crisis in generations, Lex was thinking about how he could tap an unprecedented pool of government money.
At the time, the Bank of England governorship was in transition, from Canadian Mark Carney to Andrew Bailey, a City veteran. Bailey had spent a large part of his career at the Bank of England (BofE), although he’d mostly recently run the Financial Conduct Authority, including during the period when the FCA had leaned on GAM over its handling of Tim Haywood and his Greensill investments.
Even as Bailey was settling into his Threadneedle Street office, Cameron and Lex began lobbying Sir Jon Cunliffe, the BofE’s deputy governor since 2013. What they wanted was for the BofE to include bonds backed by supply chain finance loans in the list of securities that could be acquired through the CCFF.
‘The disruption to supply chains and the financing of them is real,’ Lex wrote to Cunliffe in an email on Sunday 15 March 2020. ‘In the last week we have seen a great many fixed income investors who support the asset class step back – meaning liquidity could well become a major issue in the coming days.’
That was true, and Lex was in a great position to know it. Investors had pulled billions out of Lex’s Credit Suisse supply chain finance funds since the pandemic hit.
Lex went on: ‘You will recall that the Bank established a supply chain finance facility back in 2010 (as a part of your asset purchase facility). We think there is an urgent need to re-establish the same – given the millions of businesses that now rely on supply chain finance.’
It was a reference to the BofE’s move to support Lex’s supply chain finance programme at Morgan Stanley a decade earlier. If you could do it then, Deputy Governor, you can do it again now, Lex seemed to be saying.
Greensill and Cameron were pushing for a meeting with Cunliffe. A couple of days later, they were given a call with a couple of more junior officials. Lex’s pitch was that the traditional banks were not interested in helping small and medium-sized businesses. Greensill was. Greensill already worked with government agencies. He pointed to the NHS deals. He pushed for the bank to set up a facility of up to £20 billion to buy securities backed by supply chain finance assets. Lex emphasized the need for urgent action and stressed that a large BofE facility would help bring confidence to investors in supply chain finance. It was an incredibly self-serving pitch, given the amount of financing bleeding out of the Credit Suisse funds at that time. And it didn’t work. The BofE decided against admitting Greensill to the CCFF.
That decision left Lex furious. What was the value of Cameron’s connections now?
The former PM sent another begging email to Cunliffe.
‘Jon, Am writing to ask for your help,’ he pleaded. ‘Greensill – who I work with – have had numerous conversations with [Treasury] but have failed to get anywhere. The request is simple – please include in the CCFF the ability to purchase bonds issued in respect of supply chain finance. These allow us to pump billions into SMEs [small to medium-sized enterprises] (including every pharmacy that works with the NHS).’ This was at best misleading. Greensill only worked with a small proportion of NHS pharmacies.
Cameron continued: ‘At a time when we are – rightly – worried about how quickly banks can get loans out to small businesses, why are we potentially cutting off a market that already pumps cheap credit directly into SMEs? I think I must be missing something here. Am obviously talking to [Treasury], but would be grateful for any light you could shed on this . . . All good wishes. Dc.’
When Cunliffe replied saying it was out of his hands, Cameron turned his focus to the Treasury. He texted the top civil servant there, Sir Tom Scholar, saying he was ‘genuinely baffled’ that Greensill wasn’t given access to CCFF, and that he would call Sunak, and ‘everyone’. Minutes later, he went straight to Sunak, though the details of their conversation have never been made public. Pretty soon, Cameron was back at Cunliffe, asking for him to speak with Lex in person. Lex’s belief in his own abilities as a salesman was unshaken, even by a global pandemic. Eventually, in late April, Cunliffe finally relented and agreed to hear him out. Greensill delivered his pitch, but Cunliffe was unmoved.
The lobbying effort went on, through April, May and into June. During that period, Cameron blitzed his former government colleagues with messages. In one early April dialogue, Sunak had told Cameron he was ‘stuck back to back on calls’ and promised to talk later. In another message, later in the month, he said he was pushing officials to look for alternative arrangements that might help Greensill out. In all, Cameron sent at least fourteen separate text messages to Tom Scholar, the top Treasury civil servant; eight WhatsApp messages and two phone calls to Sunak; two more WhatsApp messages to one of Sunak’s top aides; four emails, a text and a call to Cunliffe; and dozens more messages to various senior civil servants and cabinet ministers.
In June, Charles Roxburgh, another top Treasury civil servant, personally spoke to Lex to explain the government’s decision. In a letter to Lex and Bill Crothers, who’d also leaned on his government contacts, the treasury explained that CCFF would not include buying supply chain finance assets from Greensill. First, the letter said, the market disruption had subsided since March and April. Money was flooding back into bonds as the worst of the pandemic panic had passed. Second, the government was already getting money into SMEs and didn’t need to go down the route Lex had proposed. Thirdly, the government didn’t see much evidence that Lex’s proposal would work anyway.
Greensill was shut out. He would try an alternative route.
The approach was scattergun.
Greensill tried to get a £500 million loan out of UK Export Finance (UKEF), the government agency that helps UK exporters get business and win contracts overseas. The agency looked at Greensill’s pitch, and kicked it out, having decided Greensill’s proposal didn’t support UKEF’s brief, and because of the media reports that had raised red flags about Greensill itself.
Greensill tapped government-backed emergency loans in France, Italy and the Czech Republic. The loans totalled a little under €200 million, and in each case they were taken out by GFG companies. However, instead of using the loans to pay for operating costs at the GFG businesses, the money was deposited into Greensill Bank and then used as collateral to make even bigger loans to GFG.
Sanjeev Gupta’s companies were in a critical condition. Liberty Steel, his flagship company, pleaded with the UK government for £160 million to £180 million. Without the funding, Gupta’s company said, they might not be able to keep their operations running beyond May 2020. As many as 3,000 employees in the north of England, Scotland and Wales would potentially be put out of work.
Inside the government (the Department for Business, Energy and Industrial Strategy, along with the Treasury), the view was that a bailout for Liberty Steel was a last resort, and they weren’t quite at that point yet.
Gupta’s team suggested an alternative plan, which would involve a government guarantee designed specifically for Greensill’s loans to Liberty. It was an astonishing request: a bespoke government bailout for a private steel company and a private finance business. The GFG requests did not gain traction.
Lex was also looking for access to the CBILS and CLBILS loan programmes. By mid-April, Greensill was seeking to become an accredited lender under both programmes. Lex directly emailed the chief commercial officer at the British Business Bank (BBB) three days before the scheme was even launched. Greensill’s technology could ‘help to quickly increase the reach of the CLBILS in the UK economy’, he claimed.
He was politely told to go through formal channels. There was no back door.
Greensill prepared its pitch to the BBB – Lex applied to be allowed to lend £1 billion, based on a pipeline of up to fifty clients. He was granted permission to lend up to £400 million, 60 per cent less than he had asked for. Greensill was also told not to lend more than £50 million to a single group of companies.
The outcome was disappointing. The lending restrictions were more limiting than Greensill wanted them to be. But it would have to do. For the CLBILS programme, Greensill was one of only twenty-seven accredited lenders, and twenty-four of those were banks.
During the accreditation process, the government’s business and industry department asked the BBB on eight separate occasions about Greensill’s status – whether it had been approved to participate as a lender. The government department pushed for Greensill to be prioritized in the process and for it to be allowed to provide more than £50 million to a single borrower. At the BBB, executives thought the level of government interest in Greensill seemed extraordinary.
Inside Greensill, at the company’s Warrington site, loan officers and risk management staff were told to prioritize the government loan scheme, and to figure out how much they could give to the GFG companies. Some of the Greensill staff were uncomfortable. They were concerned that the Liberty businesses weren’t all compliant with the terms of the loans. Some of the steel businesses weren’t in good financial health heading into the crisis – Greensill’s own internal estimates suggested Liberty’s Hartlepool site was effectively insolvent by late 2019, for example. That would make them ineligible to take part in the government programme.
And there were concerns that Greensill was potentially ignoring the fact that GFG was a single borrower group and therefore could not take more than £50 million in loans in total. During the accreditation process, Greensill had been specifically warned by the BBB about the group lending limits. The bank had even cited as an example, ‘British Steel’, which would be ‘one group with a £50 million limit, and it is not a £50 million facility limit per subsidiary.’
Those Greensill staff who raised questions, though, were swept aside. Executives who queried the work on GFG were reassigned to something else.
Despite the rumblings inside Greensill, the firm loaned £400 million under the CLBILS scheme – the maximum it was permitted to lend. This consisted of eight loans of £50 million each – again, the maximum. That compared with an average loan size across the whole CLBILS programme of just £3 million. It also made Greensill the fifth-largest lender in the whole programme, much bigger than even some major UK banks. The start-up accounted for 8 per cent of the value of all the loans under the scheme.
More alarming still, far and away most of the money Lex loaned out was going to companies within GFG. In total, seven loans worth £350 million pounds were dished out to Gupta’s businesses. The other loan went to a company called Aar Tee Commodities, whose owner, Ravi Trehan, was a long-time Gupta associate and previously a member of GFG’s strategic board. Aar Tee’s core business relationship seemed to be with other GFG companies too.
Inside Greensill, the loans were questioned by staff working on the credit teams. They had been alarmed to see that Nicola Gupta, Sanjeev’s wife, had bought a £42 million house in one of London’s poshest neighbourhoods, just as one of the £50 million CLBILS loans from Greensill landed.
At the same time, sales staff who suggested using the CLBILS accreditation to lend to other clients simply found there was no capacity for anything beyond GFG.
By October, officials at the BBB understood Greensill’s loans were all heading to Gupta’s businesses. Although there were circumstances under which the bank would lift the £50 million limit for a single group, Greensill had not been given that approval. The bank started to dig in. Lex was told that the loans had breached the limit, but he pushed back, saying GFG was not a single borrower. It was an extraordinary claim. The bank messaged Treasury and the Department for Business, Energy and Industrial Strategy to register its concerns.
On 13 October, officials from the bank met with Lex’s team. The meeting was tense. The bank’s officials didn’t know that Greensill was facing a war on several fronts. They didn’t know that he was under pressure in Germany to shift GFG assets out of Greensill Bank. They were unaware that Lex’s main insurance provider was shutting down his capacity to get trade credit insurance to cover the GFG loans too.
Lex was told he could not make any more loans until the bank’s concerns about GFG were resolved. Greensill later said it had received ‘political steers’ that the loans to Gupta were welcome because they supported UK steel. Inside Greensill, the word was that Gupta had been told by vaccines minister Nadhim Zahawi to get several CLBILs loans to bail him out. Later, after Greensill collapsed, Zahawi was unable to provide records of his phone messages because they’d been deleted. (In January 2022, the Financial Times reported that Gupta wrote to Zahawi thanking him for his ‘instrumental’ role in getting the Greensill loans.) The bank hired accountants EY to investigate Greensill’s lending. It was yet another investigation of a controversial aspect of Lex’s business. It meant that in just a few months, several sets of external auditors had been sent to sniff around Greensill.
Around the same time, Gupta launched an audacious bid to buy the steel businesses of Germany’s Thyssenkrupp. He never said how much he was willing to pay, although it was a substantial business, with around 27,000 employees and sales of €9 billion. Gupta said that his non-binding offer was ‘fully financed’ through a consortium of lenders led by Credit Suisse.
He also said a deal would be ‘a perfect match’ for his existing empire. The biggest benefit, however, would have been all that new financing, and – possibly – more leverage with European politicians down the line. In the end, no deal materialized. Gupta was struggling as usual for financing. He even asked SoftBank’s Misra to help, connecting him to his former colleagues at Deutsche Bank – would they finance a deal to save German steel jobs? The answer was a resounding no.