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UK Export Finance (UKEF) rejected an application for a government-backed £500mn loan to Greensill last year after being approached by Standard Chartered, independent investigators have said.

The National Audit Office, an independent public spending watchdog, says in an investigation published today that Standard Chartered had requested in February 2020 that UKEF guarantee 80% of the loan value to since-collapsed financier Greensill.

The loan application was submitted under UKEF’s export development guarantee scheme, which is designed to support UK exporters’ day-to-day business activities, the audit office says.

UKEF then held direct discussions with Greensill the following month and “did consider the merits of [its] proposal”, the audit office says.

However, it rejected the application in June the same year, and following internal discussions in September, dismissed a second application lowering the value of the loan to between £100mn and £200mn.

According to the investigation, due diligence carried out by UKEF led to “concerns relating to Greensill’s governance and how exposed Greensill might have been to some of its customers”, raising its risk profile as a potential beneficiary of the scheme.

The export credit agency also questioned whether the loan proposal “was aligned with the policy intent of the support product”.

Standard Chartered declined to comment when contacted by GTR.

Sources familiar with the situation say Greensill requested the loan, rather than Standard Chartered, and dispute the National Audit Office’s claim that the bank was a lender to Greensill.

A spokesperson for UKEF says the agency “has not provided any support to Greensill and has a rigorous set of processes that it follows on all potential transactions and requests for financial support”.

Shortly before the loan application to UKEF, an investigation by the Financial Times had cast doubt on the relationship between Greensill and GFG Alliance, a network of companies linked to industrialist Sanjeev Gupta.

It has since emerged that Gupta’s business empire was heavily dependent on Greensill as its main source of financing.

After Greensill entered administration in March this year, numerous accusations arose over its high-risk lending activities, including its provision of billions of dollars of receivables financing based on hypothetical invoices.

Gupta says that in some cases Greensill financed invoices from customers with whom the borrower had no business relationship – a claim Greensill denies.

In the UK alone, investigations relating to Greensill and GFG have since been launched by the Serious Fraud Office, the Financial Conduct Authority and the UK’s top accounting regulator.

 

Greensill claims “political steers” on steel lending

The National Audit Office’s investigation relates to Greensill’s status as a lender under government-backed emergency loan schemes, which were developed to support businesses grappling with the Covid-19 crisis.

Greensill’s role as a lender under the Coronavirus Large Business Interruption Loan Scheme (CLBILS) has been a source of further controversy, with the Financial Times alleging that it provided eight loans to companies owned by or linked to Gupta.

Though Greensill was only permitted to lend a maximum of £50mn to any single entity, the newspaper has since revealed Gupta restructured several companies in order to maximise the amount they could borrow via the scheme.

The audit office report confirms that Greensill lent £50mn each to seven GFG Alliance members, and a further £50mn to Aar Tee Commodities, whose owner was previously a member of GFG’s strategic board. Those transactions were the only loans provided by Greensill under the scheme.

Under the terms of the scheme, the government would have been expected to cover 80% of losses in the event of default, a total exposure of £320mn.

However, after a probe of Greensill’s lending activity, the British Business Bank (BBB) – as administrator of the CLBILS – withdrew its guarantees over those loans.

Strikingly, those loans made up nearly half of all CLBILS lending of £50mn or above, and accounted for 8% of all CLBILS loans by value, but only 1% by volume, the audit office says. Only NatWest, HSBC, Barclays, Lloyds and Santander lent more overall.

In early October – just days after Greensill provided five separate loans to Liberty companies, and a sixth to GFG member Speciality Steel – the BBB became concerned it was lending to a single group of borrowers.

A GFG Alliance spokesperson tells GTR that the companies receiving those loans “worked with multiple legal parties, prior to finalising any loan applications to its lender”.

“We believe those applications then underwent strict due diligence by the lender,” they say. “GFG Alliance is confident that the relevant entities abided by all rules that applied in respect to those loan applications, including rules related to business structure.”

When the BBB confronted Greensill over the loans, Greensill said it “had received ‘political steers’ that its support for the steel industry was welcome”.

The investigation reveals that the government’s Department for Business, Energy & Industrial Strategy made eight inquiries over a 19-week period about the status of Greensill’s lending accreditation and whether caps could be raised.

Former Prime Minister David Cameron, then an advisor to Greensill, was also involved in lobbying efforts.

The audit office says the BBB saw this approach as “unusual”, but that it does not believe its accreditation of Greensill or decision-making processes were influenced by external parties.

Greensill declined to comment when contacted by GTR.