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Sanjeev Gupta’s GFG Alliance has bankrolled millions of pounds in legal fees for its biggest creditors Greensill and Credit Suisse, underscoring the complex relationship between the steel magnate and lenders that are still owed billions.
The 2021 collapse of Greensill, which had lent GFG around $5bn, was a major factor in the demise of Credit Suisse. The Swiss bank had invested some $10bn in funds linked to Greensill on behalf of wealthy clients.
When the main UK entity Greensill Capital filed for administration, its lawyers partly blamed the collapse on the fact that GFG — a collection of steel plants and industrial businesses owned by Gupta’s family — had at that time “started to default” on its debts.
Reports from administrator Grant Thornton show that GFG has in recent years covered more than $24mn of legal fees and other costs for Greensill Capital, its affiliated German company Greensill Bank and Credit Suisse.
GFG, which has been subject to a UK Serious Fraud Office probe since Greensill’s collapse, is paying the fees as part of a debt restructuring agreement with creditors in November 2022. Under this deal, GFG’s creditors stopped trying to place some of its businesses into insolvency, in return for Gupta’s companies agreeing to pay off some of its debts.
Several insolvency specialists said the GFG funding of creditors’ legal costs was “unusual”, with one telling the Financial Times he could not recall a similar agreement in other UK administration processes.
GFG told the FT that “it is market standard in restructuring negotiations to pay the creditors’ legal fees”.
Grant Thornton was previously under scrutiny for its ties to GFG when it took on the Greensill administration, having received millions of pounds from the metals group for advisory work in the years before Greensill’s collapse.
The administration has been lucrative for the firm, which recently disclosed that it expects to earn £46mn in fees from the process.
The funding arrangement also casts light on the approach Greensill and Credit Suisse have taken to try to recover money from Gupta’s companies.
The creditors have held back from trying to enforce on Gupta’s assets, even though Credit Suisse told investors last year that a “proposed payment date” under the restructuring agreement had “passed without payment”.
GFG said that it was “working towards final execution” of a new agreement with creditors that was signed in March, adding it had “not missed any contractual payments to Greensill creditors”.
Beyond its lending to GFG, Greensill also has security on shares in GFG’s most valuable business, Australian steel group InfraBuild, although GFG disputes the validity of this security. Gupta’s creditors could also potentially claim against Sanjeev Gupta’s personal assets around the world, which include mansions in the UK and Australia.
Greensill Bank, which is under a separate administration process overseen by lawyers from CMS, has the biggest debt exposure to GFG of the three creditors.
While Greensill Capital’s founder Lex Greensill once described the bank as a “warehouse” that took on debt temporarily before it was packaged up and sold to other investors, the bank had more than €2.8bn of exposure to GFG when it collapsed.
Greensill Capital also took hundreds of millions of pounds of GFG debt on to its own balance sheet, even though this part of the group was supposed to act only as an intermediary between borrowers and lenders. The amount GFG owes to Greensill Capital was $587mn in March.
As a result of investments in Greensill, funds at Credit Suisse’s asset management division ultimately had $1.3bn of exposure to GFG. According to an April update to investors, more than $900mn of this debt has not been repaid.
UBS, which rescued Credit Suisse last year after regulators intervened, recently said it would compensate investors in the Greensill-linked funds the equivalent of 90 per cent of their original investment.
Before its collapse, Credit Suisse also paid millions of pounds to Greensill Capital’s administrators to help it recover its debts.
Grant Thornton, Greensill Bank’s administrator and UBS declined to comment.
https://www.ft.com/content/b8e71769-f771-4146-a1f8-5d2bbab9987b
