Lex Greensill was upbeat in a video to staff three weeks before the group collapsed into administration.
Lex Greensill was upbeat in a video to staff three weeks before the group collapsed into administration.

Greensill boast about liquidity weeks before collapse

Lex Greensill assured staff that his eponymous company had "enormous amounts of liquidity" three weeks before the finance group's insolvency.

In an internal Greensill video created on February 15 - the audio of which the Financial Times obtained and posted online - the Bundaberg farmer turned global financier also told staff that he was close to striking a new insurance policy, thanks to "our friends at Marsh and Chubb".

But three weeks later the group collapsed after it failed to strike a deal to renew its policies with its insurers and Credit Suisse froze $US10bn of investment funds - which Greensill relied on as buyers of the debt securities it issued - by which time, Mr Greensill had a different message to staff: "goodbye".

His upbeat comments from weeks earlier were despite doubts emerging about Greensill's insurance coverage last July, when one its insurers, Tokio Marine, told the company that an employee at one of its subsidiaries, BCC Trade, has "exceeded his authority in certain dealings", relating to Greensill's policies.

Greensill had been negotiating with its insurers to retain coverage and by mid-February it looked like it struck a breakthrough.

He said the financier was doing "some great work with our friends at Marsh and Chub, our lead insurer … to make a tweak the new insurance regime that we put in place, so as to make it look pretty much exactly the same way that our previous insurance regime".

"That will mean that we can further utilise that insurance and deliver more assets in. And the feedback we have had from Chubb last week is they're very supportive of making that tweak, which will then put us back in a situation where the funds benefit from 100 per cent insurance with no gap in cover, which will enable us to really ramp up the utilisation of that capacity and course, the liquidity in the funds."

In regard to liquidity, Mr Greensill told staff that "we have got enormous amounts" available "for assets in the funds right across the spectrum".

He said this included from the investment grade funds with Credit Suisse "right through to the high income fund that can be the non-investment grade fund that doesn't require insurance" and Greensill was continuing to see "robust inflows".

"Indeed, we've actually had to kind of slow down the inflows."

Two weeks later, Greensill took the unusual step of suing its insurers BBC and Tokio Marine after it failed to renew its policies and warned of "disastrous consequences" and "adverse effects on its clients' businesses".

It later dived into administration with Grant Thornton running parallel processes for Greensill's Australian and UK operations.

In the weeks leading up to the group's collapse, regulators were placing increasing pressure on Greensill over its exposure to Sanjeev Gupta's GFG Alliance, which owes Greensill about $US5bn.

Despite creditors circling, and Credit Suisse and Citibank filing wind-up orders on several of Mr Gupta's assets, including the Whyalla steel works, the British industrialist is adamant he does not need to pay up.

"In this situation it is natural to some degree for lenders to want to protect their own position but we also have our position," Mr Gupta told the BBC last Thursday.

"We have committed facilities from Greensill for three years. According to us, these debts are not due.

"It makes no sense for them or any of their creditors to destroy jobs but more importantly to destroy value because that is the value that will give them their recovery. So I am really confident that we will find short-term solutions through our own effort and long-term solutions through refinancing."

Originally published as Greensill boast about liquidity weeks before collapse

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