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Matt Levine

Greensill Didn’t Just Finance Supply Chains

Also the Elon Markets Hypothesis, Apollo’s culture and Bill Gross vs. GameStop.

I feel like I don’t yet entirely understand what went wrong at Greensill Capital. Greensill, the story goes, was a leader in the business of supply-chain finance, in which it would insert itself between buyers and sellers of products, paying the sellers a bit early (but at a discount) and collecting the full payment later from the buyers. This is safe, short-term financing, which Greensill would package into notes, some of which were insured by credit insurers. Then it would sell them to funds (particularly those run by Credit Suisse Group AG) that wanted slightly higher than money-market returns. Then it all went wrong in suggestive but still murky ways: The notes lost their insurance coverage, Greensill’s lending was concentrated on a few clients, there were various potential conflicts of interest, and it turned out that a lot of the lending was risky longer-term lending against “future receivables” rather than simple supply-chain finance. 

On Monday, coal company Bluestone Resources Inc. sued Greensill for lending Bluestone a bunch of money and then blowing up. Here is the complaint, which is wild, and which gives the clearest picture I’ve yet seen of how Greensill operated.