As the crisis mounted, Lex shuffled cash from one pot to another. In May 2020, the Peter Greensill Family Trust provided a $100 million loan to the company. Julie Steinberg and I found out about it. Greensill had provided the trust with a charge over its assets as security for the loan, and that charge was registered on the Companies House website, in plain sight. It was an odd situation. Why would Greensill, which was running billions of dollars in supply chain finance facilities and working with some of the biggest companies in the world, a client of the biggest banks on Wall Street, need a loan from Lex’s family? And why would the family insist that the company was used as collateral?
When we asked Greensill for a comment, James Doran and Lex were typically belligerent. Occasionally, Greensill needed some month-end cash flow to cover timing differences on payments. The documents we were looking at were just formalizing a long-standing agreement. And the family trust was cheaper than borrowing from a bank. If we wrote about it, we would look foolish.
We didn’t know much about the loan at all, although they did let slip that it was a revolving credit facility to the tune of $100 million. That was huge, although the major questions remained unanswered.
Later, after Greensill collapsed, Lex wrote about the loan in a legal statement filed as part of the administration. It turned out that much of what he and Doran had told us had been false. The Peter Greensill Trust loan was entirely new. It was not some long-standing agreement at all. And it reflected the company’s growing cash-flow issues, not a solution to short-term month-end timing differences. Greensill was burning through cash, and its biggest clients were not paying their bills.
The family loan was only paid off after Lex persuaded Credit Suisse to stump up an even bigger loan.
The $100 million Family Trust loan was the first of a series of Hail Marys – last-ditch, desperate attempts to stave off the converging crises that were landing at Lex’s door.
THROUGHOUT 2020, GREENSILL’S future hung in the balance. On the one hand, investment bankers were still touting the firm’s potential multibillion-dollar IPO. On the other hand, there were a whole series of issues, several of them existential.
BaFin was demanding Greensill shift billions of dollars’ worth of loans to Sanjeev Gupta off the balance sheet of its German Bank. Its main insurer, Tokio Marine-owned TBCC, was threatening to pull the plug, leaving Greensill unable to sell the loans it generated to investors. There were also several third-party investigations into Greensill, with auditors and partners crawling over the business all year long. The UK government Covid-19 bailout schemes had proved of only limited use, and Greensill’s role in them had attracted further scrutiny too.
Lex had some success in shifting the GFG loans elsewhere. He sold tens of millions of dollars’ worth of GFG-related assets to an Italian bank, GBM Banca, a Milan-based firm that had also been the subject of a potential takeover by Sanjeev Gupta. In 2021, the bank, then renamed Aigis Banca, collapsed because of these loans.
Through spring and summer 2020, tens of millions of dollars of GFG loans also went to White Oak Global Advisors, a US debt investment firm. When White Oak’s UK unit, based in Chester, had bought about $50 million of the GFG loans, the firm told Greensill it could not take any more. Lex wouldn’t be foiled. He structured a new, complex deal – effectively promising to take the assets back from White Oak if they required him to. It had the effect of shifting GFG assets off Lex’s hands, at least temporarily.
Despite all the strains on Greensill, Lex mostly appeared outwardly calm, rarely showing signs of stress. In late summer, Julie and I had approached Greensill as we had heard the business was struggling, clients were abandoning the company and its access to insurance was drying up. We had heard that Greensill was desperately trying to raise new capital to avoid going out of business.
As so often, Greensill pushed back. Doran and Lex said that it was raising the new funds from a position of strength. Lex and his new external public relations team, led by Craig Oliver – a former BBC journalist and Director of Communications for Cameron in Number 10 Downing Street – agreed to a call. Lex Zoomed in from his Cheshire home. Oliver, who had been knighted by Cameron in his resignation honours list following the Brexit referendum, was the latest in a long line of external Greensill PRs. He sat in his kitchen, hardly appearing to be paying any attention at all. Gabe Caillaux was also on the call, for moral support. They agreed that things were tougher than anticipated but insisted a planned fundraising – of up to $1 billion – was a sign their business was thriving. The hunt for new capital was a sign of demand from investors who wanted to back the business, they claimed. Caillaux said GA wouldn’t be putting money in – they’d already maxed out on Greensill per the firm’s internal investing rules.
The notion that Greensill was raising capital for further expansion or because things were going well didn’t ring true, and certainly didn’t stack up with what we were hearing from other sources in the market, who described Greensill retrenching. Hiring had stopped. Some previously loyal executives were asking around about jobs elsewhere. Greensill was no longer bidding on big supply chain programmes. More insurers and funding partners were becoming reluctant to work with Greensill or had stopped working with them altogether.
Greensill was indeed on a worldwide search for new investors for a round of pre-IPO funding. It is not uncommon for companies to sell a large block of shares this way to a big institutional investor ahead of listing its shares. The money is often used to help the company improve its governance and consolidate its business. The appeal to investors is that they get in at a discounted price, ahead of the IPO.
In September, Greensill’s advisers from Credit Suisse investment bank launched ‘Project Olive’ – the code name for the funding round – and told Lex that they were confident of strong demand for an investment of up to $1 billion, at a valuation ‘materially higher’ than what had gone before, perhaps as high as $7 billion. They had sounded out nine big institutional investors from around the world, including massive global fund managers at BlackRock and Fidelity, and identified another twenty that might be interested. Some of the investors they had spoken with already had said they could potentially put money in. Almost all of them said they would need to know more about the risk of defaults, the credit due diligence process, and the relationship between Greensill and SoftBank.
A pitchbook circulated by Credit Suisse to all potential investors touted Greensill as a ‘market-leading disruptor’ with ‘cloud-based integrated technology’ and a ‘best-in-class founder-led management team backed by an experienced Board and engaged advisers.’ The document said Greensill had expertise in algorithms and artificial intelligence. It claimed Earnd had been adopted by the NHS – rather than just a handful of NHS Trusts – and was offered to all its 1.5 million employees. And it said Greensill’s annual revenue was forecast to hit $1.4 billion by 2022.
All of this was wildly optimistic. Greensill was struggling to hit revenue targets. Its Earnd business was going nowhere. There was very little in the way of AI at Greensill. It was also the subject of several ongoing investigations by business partners and regulators. Some of this was already in stories in the media. The fundraising went very slowly.
In October 2020, Lex knew the firm was in dire need of cash. He turned to his bankers at Credit Suisse and asked for a bridging loan to see the company through the next few months until it could complete the funding round. He wanted $140 million.
In London, Credit Suisse’s risk managers rejected the application. They had read the reports about the BaFin investigation, and they knew about Greensill’s exposure to Gupta. Lex said he would put up additional collateral for the loan – there was $50 million in cash in a Greensill bank account and around $1 billion in trade receivables that he could pledge too, he said. He also had cheerleaders inside the bank, in Zurich and in Asia, who complained that not making the loan could see a potentially lucrative client turning to one of their competitors. If Credit Suisse didn’t do it, Citigroup, which ran trust accounts for the Greensill businesses, could easily make a loan of that size, for instance.
The decision on the loan was pushed up the chain of command, to Lara Warner, the head of risk and compliance. She had previously brushed aside concerns about Greensill’s business. This time too, she waved the loan through, partly on the advice of Greensill’s supporters in the bank in asset management and in Asia.
In truth, it was little more than a stopgap measure – and one that Credit Suisse would regret a few months later when Lex’s business collapsed, leaving the Swiss bank out of pocket.
In the meantime, Lex remained desperate for more funding from an inbound investor. With pots more – permanent – cash, Greensill could find a way to shift his problems around once more, buy a bit of time, and get back on track. Outwardly, he continued to express optimism that the firm’s current investors would put more money in.
Lex had told colleagues in the autumn that General Atlantic was interested in investing $500 million more into Greensill. That was totally misleading.
Lex also told colleagues that SoftBank would put more money into the firm too. Misra would do it, so long as they could find another investor to stump up some cash first. This, again, was wishful thinking. There was no such commitment from the Vision Fund or from SoftBank, and Lex’s relationships with both Misra and Masa were on the rocks.
The firm, meanwhile, remained under pressure to deliver a huge run-up in revenue, to meet targets that would determine whether investors saw Greensill as a fast-growing tech star in the making or queried whether its business model was foundering.
Greensill had originally budgeted that 2020 turnover would reach about $850 million – a staggering sum, considering that the company had made less than half that the previous year. It was proving way too ambitious. By July, Greensill had veered way off course, with just about $190 million in revenue. Halfway through the year, Greensill had delivered less than a quarter of the revenue it needed to stay on track for the year.
That was partly because of the pandemic, which had slowed some trade. But it was also just a factor of the Greensill business model – it was still over-reliant on just a handful of riskier clients to generate most of its revenue and profit. And now, outside scrutiny meant it was being forced to limit its loans to those same clients.
Given the struggle to hit its numbers, Lex and his senior lieutenants – Neil Garrod the CFO, and others – settled on a new budget for the year, slashing their target by about 30 per cent, or $255 million, to $600 million. Even that reduced benchmark was proving elusive. By December, Lex and his inner circle of top executives were hoping to hit just $500 million. The new number was a little more than half of the original budget target that Greensill had set for the year.
Lex knew that the numbers were going to fall short of what he had promised to deliver. For a hot tech company on the rise looking to show exponential growth, stalling like this was a disaster. Investors in tech companies buy into the idea that if they get in early, they can ride a wave of rapid growth to untold riches. If the pace of expansion slows, then the whole story looks suspect. Against the backdrop of all the other red flags at Greensill, the disappointing revenue numbers would put a massive dent in the company’s reputation. The promise of a massive IPO payout was soon looking like less than a pipe dream. It looked utterly, completely hopeless.