Greensill uses taxpayer loans to reduce exposure to Sanjeev Gupta

Greensill Bank used state-backed loans from three European governments to reduce its exposure to companies owned by Sanjeev Gupta, highlighting the potential level of taxpayers’ exposure to the metal giant’s troubled business empire.

The plan described in a document seen by the Financial Times provides insights into the strategy Greensill Bank used when trying to appease regulators worried about the risks of Gupta GFG alliance loans.

The supply chain finance group Greensill Capital collapsed in March, triggering International political and financial scandalThe relationship between the lender and Gupta is currently a focus Criminal investigation Converted to GFG by the UK Serious Fraud Office.

Last year, Greensill’s bank subsidiary in Bremen faced increasing Pressure from the German financial regulator BaFin In order to reduce its large number of loans to GFG.

According to a report by the bank’s executives, in response, Greensill Bank developed a plan to offset its credit risk using government guarantees provided under Covid’s economic measures.

At the end of July 2020, Greensail Bank wrote to BaFin outlining a plan under which government-backed loans will be provided to three GFG companies from France, Italy and the Czech Republic as the bank’s provision to GFG Cash collateral for existing loans. Report from Michael Frege, manager of the German law firm CMS Hasche Sigle.

The report explained that Greensill Bank’s credit risk to GFG will be transferred to the government. According to the manager’s report, at the time of Greensill’s collapse, GFG owed its banks in Bremen more than 2.8 billion euros.

GFG companies in France, Italy and the Czech Republic received four loans with a total value of 190 million euros, and their respective governments provided guarantees of 80% or 90% of the loan value.

The Alvans Aluminum Group factory, operated by GFG Alliance Ltd, is located in Dunkirk, France. GFG was affected by the Greenhill collapse and is now trying to repay its creditors © Thierry Monasse/Bloomberg

According to reports, the lawyer working for the administrator is reviewing the validity of the loan guarantee.

In addition to the £400 million taxpayer-backed loan provided to eight Gupta-related companies under the UK’s Coronavirus Large Business Interruption Program, these loans have also been approved.The Financial Times previously reported that Gupta reorganized his business last year Maximize the loan amount supported by UK taxpayers He can get it from the plan.

In France, the National Investment Bank BPI provided support for two loans provided by Bank Greensill to Alvance Aluminum Group at 17 million euros and 10 million euros. Liberty Magona Srl is part of GFG’s steel business and has received a loan of 86 million euros backed by the Italian Sace export credit agency. At the same time, in the Czech Republic, GFG’s steel business Liberty Ostrava received a loan of 76 million euros backed by the country’s export credit agency Egap.

The entire group was shocked by the collapse of Greensill, its largest lender. GFG is now trying to refinance and repay creditors.

Management of Greenhill Bank Criminal investigation After BaFin filed a complaint due to suspected manipulation of the balance sheet, the bank ordered the suspension of the bank’s business in early March. A forensic audit conducted by KPMG found that Greensill Bank “was unable to provide evidence of the existence of accounts receivable purchased from the GFG Alliance on its balance sheet”.

GFG and Greensill declined to comment.

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