Greensill creditors are still wondering if insurance contracts will pay out after the after the global supply chain finance firm’s spectacular collapse in 2021.
Four years ago, Greg Brereton, an underwriter at Sydney insurance firm Bond & Credit Co, and Lex Greensill, the supply chain finance firm's founder, agreed on a £23 million insurance cover for loans to a waste plant operator outside Hull.
The agreement, included in court filings, reflected the crucial relationship between the financier and the insurance executive, whose firm eventually provided $10 billion of coverage against the risk of default on Greensill's supply chain lending, with the financial risk held by global insurance and reinsurance firms sitting behind BCC. Brereton was eventually sacked, and an investigation was launched into his dealings with the lender. Meanwhile, Greensill failed to find insurance elsewhere and eventually collapsed.
Now, a Financial Times report revealed that Greensill creditors struggling to recoup billions of dollars of client money are eagerly awaiting proceedings in Australia’s federal court, where a series of insurance claims by Credit Suisse and other creditors have been brought together in what is being regarded as a test case for the billions of dollars of Greensill coverage, with pre-trial hearings to commence in November 2022
“To the extent that the insurance is found to be invalid, this will inevitably lead to even further delay and uncertainty surrounding repayments,” said Natasha Harrison, managing partner of Pallas law firm that represents some Credit Suisse investors, as reported by Financial Times.
A Credit Suisse investor said he found a red flag related to the strength of the insurance cover when the Swiss bank identified three Greensill borrowers – Sanjeev Gupta's GFG Alliance, construction company Katerra, and mining group Bluestone – where it could struggle to recover funds.
“In my head, I was wondering, why are they doing this if the insurance is solid?” the person said, as reported by Financial Times.
Greensill's founder and former directors continue to face challenges after the company collapsed. Most recently, they were contacted by a UK government agency whose investigation could lead to their disqualification proceedings.
