SoftBank-Backed Greensill May Raise Capital for Expansion
SoftBank-Backed Greensill May Raise Capital for Expansion
(Bloomberg) -- Billionaire Lex Greensill’s firm is considering raising capital as its banking arm faces regulatory scrutiny and many of its clients hit financial difficulties this year.
SoftBank Group Corp.-backed Greensill Capital, a provider of supply chain finance, may look to raise funds that could value the firm at $7 billion, according to a company statement late Thursday. That would double the valuation the company achieved a year ago, according to Dow Jones, which reported the plan earlier. Greensill Capital didn’t specify how much it could seek to raise.
The finance firm specializes in extending short-term loans to companies secured against invoices. Many of those loans are then packaged into funds run by Credit Suisse Group AG and GAM Holding AG, meaning that much of its lending is funded by investors hungry for yield and the security of short-term debt. Greensill, a former Morgan Stanley banker, established the firm in 2011.
“The Covid-19 pandemic has accelerated our growth trajectory over the last few months and increased the demand for our technology-led working capital solutions,” a Greensill spokesperson said in the statement. “A potential capital raise would enable us to accelerate the execution of that strategy.”
Greensill has recently been in the spotlight for reasons other than growth. German financial regulators are examining a bank the firm owns in Germany over its large exposure to assets linked to British-Indian entrepreneur Sanjeev Gupta. Supply chain finance funds run by Credit Suisse, which invest solely in assets sourced by Greensill, have suffered client withdrawals. And companies Greensill has helped finance, including Agritrade International Pte and NMC Health Plc, have collapsed.
Masayoshi Son’s SoftBank Vision Fund injected $800 million into Greensill in May 2019, and another $655 million in October of that year.
Credit Suisse this year kicked off an internal probe into the supply chain funds after the Financial Times reported on a complicated network of relationships involving Greensill and SoftBank. The probe concluded in July with the Swiss lender revamping its investment guidelines for the funds, saying at the time that no clients had suffered losses, and that the overhaul was intended to “further protect the interests of all” investors.
The complexity of matching investor demand to supply underscores the challenges for an investment strategy that searches for yield in the often opaque area of invoice-based financings. Because these loans are typically small and mature quickly, finding enough assets from a diverse group of borrowers can be difficult, particularly for a young firm such as Greensill.
Especially in the early years, the firm relied heavily on financing companies tied to Gupta. That relationship has since attracted scrutiny from regulators, with German authorities examining a bank Greensill owns in the country over its exposure to Gupta-linked assets, Bloomberg has reported.
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