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Australian regulators probe governance issues linked to Greensill parent’s collapse

Australian regulators are investigating corporate governance issues linked to the collapse of Greensill Capital’s parent in the country, which the local administrator said had attracted more than $4bn in claims from creditors.

Asic, Australia’s corporate regulator, told the nation’s parliament on Friday that it had been investigating Greensill Capital Pty, the Australian parent of London-based Greensill Capital since November. It said it was also co-operating with the prudential regulator to understand whether Australian insurers QBE and Insurance Australia Group, as well as Japan’s Tokio Marine, had exposure to the collapsed supply chain finance company.

Karen Chester, deputy chair of Asic, said Greensill’s business model became “extremely risky” as the company expanded and that there would be implications in Australia following its collapse last week, including the withdrawal of supply chain finance services. As Greensill is owned by an Australian, Lex Greensill, Asic would look into further issues, she added.

“There are some corporate governance issues that may be in our jurisdiction that we may well be looking at,” said Chester, noting that some investment banks were promoting a potential initial public offering for Greensill late last year.

Chester, whose comments were first reported by the Australian Financial Review, said the prudential regulator was investigating any potential exposure of local insurers, which provided credit insurance to Greensill that protected it against client defaults.

QBE said in a statement on Friday that it had “no direct exposure to Greensill”. IAG, which declined to comment, has previously said it had no “net insurance exposure” to Greensill, having passed its risk to Tokio Marine as part of the 2019 sale of its 50 per cent stake in Sydney-based underwriting firm The Bond & Credit Co. Tokio Marine has questioned whether the insurance policies at the heart of Greensill’s business model were valid. Tokio Marine declined to comment on Chester’s remarks.

The regulatory scrutiny of the Greensill collapse came as administrator Grant Thornton told creditors that Japan’s SoftBank had submitted a $1.15bn claim on Greensill Capital, the holding company for Greensill’s operating business in the UK.

Two people who attended the meeting told the Financial Times that Credit Suisse had submitted a claim for $140m, although the administrator was investigating whether a portion of that had already been repaid. The Peter Greensill Family Trust, a family trust whose beneficiaries include company founder Lex Greensill, has made a claim for $60m over a loan advanced to the company in October 2020.

IAG made a A$22,000 claim, which it said was for legal costs awarded following Greensill’s failed legal effort earlier this month to force extension of its insurance. Tokio Marine also made a $1 claim, people who attended the meeting said.

Grant Thornton’s Matt Byrnes told creditors that the Association of German Banks had advanced a contingent claim, which could be worth €2bn. The claim relates to any future drawdown on the German government’s deposit insurance scheme following the collapse of Greensill Bank AG, a subsidiary in the country that was declared insolvent this week, said a person at the meeting.

James Roland, a partner at Gadens, a Sydney-based law firm, said contingent creditors typically lodged claims with administrators for voting purposes and to strengthen their position during the administration process.

“This is because contingent claims are inherently uncertain in that there will only be an actual debt owing by the debtor company to the creditor if a certain event (for example the contingency) occurs,” he said.

Byrnes told creditors that Greensill’s Australian parent had limited cash in its bank accounts and the company would lodge a claim worth almost $800m against its UK subsidiary in an attempt to claw back some funds, according to two people who were present at the meeting.

The meeting lasted just under an hour and was attended by 59 creditors and their representatives. Representatives from Asic, Australia’s attorney-general’s office and the tax office attended the meeting. A representative of the Association of German Banks also attended.

Additional reporting by Ian Smith in London

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