Greensill gave neighbor’s business a taxpayer-backed Covid loan

Greensill Capital has provided a government-guaranteed coronavirus loan to a company owned by a neighbor of founder Lex Greensill, after the two jointly lobbied their local council to adopt their controversial chain-funding model. ‘supply.

Greensill Capital is under investigation for allegedly abusing a Covid-19 loan program for large corporations, which led to the state-owned British Business Bank to suspend government guarantees on 400 million pounds in loans to companies linked to metals tycoon Sanjeev Gupta.

Last year, the now collapsed finance company also made loans worth £ 18.5million to small businesses under another emergency funding scheme, including a £ 5million loan to Special Needs Group, a private company providing services to people with learning disabilities.

The Chester-based company is owned by local businessman Barnabas Borbely, who lives on the corner of Lex Greensill in the Cheshire village of Saughall, according to company documents. Borbely is the same age as Greensill, who will turn 45 later this month, and the two are both qualified lawyers.

Greensill Capital already has meticulous examination for the amount of funding it has given to obscure businesses like Special Needs Group, which is small enough to qualify for an exemption allowing it to file unaudited accounts. Details of the government-guaranteed loan, which had not previously been released, were released this year under EU transparency rules.

Special Needs Group owner Borbely has been involved in Greensill’s efforts to persuade his local council to use his company’s financial products.

The pair held a meeting in 2018 to “discuss the potential benefits of the supply chain finance model promoted by [Greensill’s] companies, ”according to documents released by Cheshire West and Chester Council.

While the board never adopted the proposed program – determining that it offered “no benefits” – Greensill Capital announced last year that it had developed a “revolutionary fundraising model” with Special Needs Group which could reduce “the financial burden on local authorities”.

“Greensill is able to use fintech to identify and factor in future cash flows from local authorities and central government to their suppliers rather than working with historical data,” the company said in the announcement of September 2020.

While traditional supply chain finance involves providing credit on invoices, Greensill took it a step further and began lending against hypothetical future invoices, a risky practice that contributed to the financial group’s downfall.

Lex Greensill and Greensill Capital declined to comment. Borbely did not respond to requests for comment.

Greensill also provided funding to Special Needs Group through Credit Suisse’s $ 10 billion supply chain finance fund, which exposed some of the Swiss bank’s wealthiest clients to potential multibillion losses. of dollars.

An update Credit Suisse provided to investors this month showed that the bank’s main fund had around $ 20 million exposure to the Special Needs Group. This debt is one of a cluster of smaller exposures that the Swiss bank hopes to meet an agreed-upon repayment schedule, according to a person familiar with the matter.

Along with his attempt to get Cheshire West and Chester Council to use supply chain finance, Lex Greensill has also negotiated a deal with the council to purchase land, which is close to his and her home. Borbely, to transform it into a nature reserve.

The council approved the sale of the land in February, but then suspended the transaction to review the terms, in light of Greensill’s involvement in a high-profile lobbying scandal in Westminster.

While the board audit found that Greensill first raised the land deal at the 2018 meeting to present its financial products to the board, it determined “that there was no connection between the proposed sale and supply chain finance model offered by his company Greensill. Capital city”.

The Cheshire West and the Chester Council have said they have “acted with transparency and integrity in their dealings with Mr Greensill and his agents”.