The $7 billion bank behind Australian billionaire Lex Greensill has been frozen as his company continues to unravel

  • Lex Greensill’s company has been delivered another blow after the German regulator BaFin placed a moratorium on the $7 billion bank at the centre of his enterprise.
  • Preventing the supply chain financier’s bank from receiving payments or making sales, it effectively grinds the company to a halt amid fears it could become over indebted.
  • Greensill is now reportedly preparing to enter insolvency in Australia and the UK, as it finalises a $125 million fire sale of assets to Apollo Global Management.
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One of Australia’s richest men has had to watch his fortunes unravel in the space of just a few days, as parts of his business look to be seized by either corporate vultures or financial regulators.

The eponymous financing company of Lex Greensill, which pays invoices for clients at a discount and then sells the debt into the bond market, was struck yet another blow on Wednesday after German regulator BaFin froze the enterprise’s beating heart, the $7 billion Greensill Bank.

“The moratorium had to be ordered in order to secure the assets in an orderly process,” the financial authority said in a public statement.

With BaFin noting there was a risk of Greensill getting in over its head in debt, the freeze will stop the supply-chain financing company from accepting payments or sales for at least six weeks.

The Bank had been under Greensill control since 2014 and had been used to lend money to clients and keep the wheels turning.

The regulator is particularly concerned regarding the Bank’s substantial exposure to the British billionaire Sanjeev Gupta’s GFG Alliance which, per The Financial Times, has been loaned more than half of the bank’s outstanding $5.4 billion debt.

“During a special forensic audit, BaFin found that Greensill Bank AG was unable to provide evidence of the existence of receivables in its balance sheet that it had purchased from the GFG Alliance Group.For this reason, BaFin has already taken extensive measures to secure the bank’s liquidity and to limit risks for Greensill Bank AG and has appointed a special representative for the bank,” the regulator said.

Gupta, who is in the midst of revitalising the Whyalla Steelworks in South Australia, has for years had to defend himself from questions over how his complex and private corporate network is financed. The ever-evolving Greensill saga has drawn more attention to that, although GFG has reiterated it retains “adequate funding”.

Doubts over Greensill’s future

As a financier with its funding now effectively cut off, Greensill’s days now appear numbered.

By Friday, it is expected to have finalised a $125 million fire sale of some of its assets with US wealth manager Apollo, that from a balance sheet that was once valued at more than $5.1 billion. It could also enter insolvency arrangements in the UK, where the company is based, as well as in Australia.

A potential collapse would bring a dramatic end to what has been for years an impressive and carefully-crafted success story.

Greensill has said that he saw firsthand the inefficiencies of business invoicing growing up on a watermelon farm in Bundaberg, difficulties which he says prevented his parents from sending him to university.

Leaving Bundaberg, he worked on the issue directly with both Morgan Stanley and Citibank before founding Greensill in 2011 with his brother Peter, who also serves as a company director.

The success of their proposed model found serious traction, minting them as billionaires in a few short years and taking Lex to London, where he notably employed former UK Prime Minister David Cameron as well as former Australian foreign minister Julie Bishop as senior advisors.

Cameron for his part, had heralded the business as truly innovative.

“From its UK foundations, Greensill has taken on the world, upending traditional financing models and democratising capital to give businesses, including many SMEs and small traders, access to low-cost funding,” he said.

He’d go on to advise some of the world’s most powerful people, including billionaires and, reportedly, the British and American governments.

On Monday, that all appeared to crumble however when Credit Suisse froze four funds worth nearly $13 billion, that pulled the handbrake on the business. Curiously, the company webpage detailing its board members and illustrious advisers disappeared shortly after.

Now, after a decade of building his empire, Greensill’s eventual unravelling may take just one week.