FL-2022-000014 - [2025] EWHC 2631 (Ch)

On about 8 December 2020 Mr Greensill was contacted by BaFin, which expressed the view that the Greensill Group should accelerate the reduction of its exposure to a group of companies known as GFG (associated with the Gupta family). Minutes of a GCPL meeting of 31 December 2020 recorded that:

“on 8 December 2020 BaFin had communicated that it required an acceleration of the reduction in exposure to the GFG group in a manner, which in the group's view, was not sustainable. In summary, for every $100 of GFG receivables due to be rolled over BaFin required that only $25 be rolled over (i.e. a 75% reduction in exposure).”

As noted above, TDR Capital had been leading the investors who had expressed indicative interest in the proposed IPO of the Greensill Group. The 31 December 2020 GCPL Board minutes recorded that:

“LG further explained that he had spoken to the head of bank supervision at BaFin on 15 December 2020. [He had explained that the request for further acceleration of the GFG exposure had had to be disclosed to equity investors and the uncertainty meant that TDR, which was planning to provide $350m of equity and to bring along another investor which would provide £150m of debt and $50m of equity, would not proceed with the investment.] …

LG said that he had found out the impact of the BaFin discussions on TDR’s investment on 23 December and had immediately contacted Softbank (as a significant current shareholder) to discuss whether it would be prepared to provide a bridge facility …

LG explained that he had also had further conversations with TDR. TDR had said that it could consider investing in the group at a lower valuation provided the position with BaFin had been clarified. LG had considered that this was a viable proposition and proposed to have further discussions with TDR and SoftBank on Monday and Tuesday next week.”

On 23 December 2020 Mr Greensill enquired of Mr Misra whether the Vision Funds might be prepared to agree a bridge facility of $1.5 billion.

An SBIA document entitled “Greensill Update – 27 Dec 2020”, stated that “German regulator BaFin has mandated that Greensill Bank (GB) reduce its concentrated exposure to GFG Alliance of $2.05bn down to US$600M by 31 Dec 2020”. It further stated that: “Bridge facility US$1.5B proceeds to be used to effectively “cash secure” exposure to GFG Alliance at Greensill Bank until GFG can repay the principal outstanding under the notes” and “US$628 is needed immediately to comply with BaFin’s mandate”.

As already noted, on 31 December 2020 there was a Board meeting of GCPL. SBIA’s representatives attended as observers of the GCPL Board. The minutes stated that:

“… LG had been informed this morning that Softbank was not prepared to provide a bridge facility. It was, however, prepared to consider making a further equity investment of up to $250m provided it was alongside investments from other parties. In explaining its decision, Softbank had noted that it had provided support on a number of previous occasions. Softbank had also noted that its investment was made solely through the SoftBank Vision Fund and if it was to cross a 50% threshold in terms of equity ownership it would need to consolidate Greensill Bank AG, which was a red line.”

Ms Katrina Buckley, A&O’s Head of European Insolvency and Restructuring, and Ms Chris Laverty, of Grant Thornton, attended the 31 December 2020 GCPL Board meeting. The 31 December 2020 GCPL Board minutes stated that:

“5.2

The directors noted and carefully considered the following matters and material for the Company:

(a)

The most recent annual financial report as audited by the Company’s auditors;

(b)

The most recent half-year financial report;

(c)

The most recent monthly management accounts;

(d)

The most recent … month cash-flow report for the Company;

(e)

The report from management of the Company confirming that (i) there are no outstanding overdue money judgments or letters of demand against the Company, and (ii) there are no material creditors of the Company whose debts are outside of normal trading terms;

(f)

The Company and its English subsidiary, GCUK, are conducting capital raising in order to further fund the business activities of the Company and its subsidiaries as referred to in an earlier part of the meeting.

5.3

Having had regard to the above matters and material including the verbal update provided by NG as to the Company and the group’s financial position, it was resolved that in the view of the directors the Company is presently solvent, and that for the Company to continue to trade (and incur debts) in accordance with the cash-flow forecast set out above, it will not become insolvent. ….

5.4

The directors further noted that negotiations with government authorities in relation to the conduct of the business of the Company’s German subsidiary, Greensill Bank AG, were ongoing, and that those negotiations were potentially adverse to the trading position of Greensill Bank AG and to the capital raising set out above.

5.5

Having regard to the matters in paragraph 5.4, it was resolved that, while the directors do not presently consider or suspect that the Company is or may become insolvent, out of prudence the directors recognise a risk that it could be reasonably suspected that the Company may become insolvent in the future, if the matters in paragraph 5.4 do not resolve favourably for the Company and its subsidiaries.

[…]

6.3

It was resolved that, noting the resolution in paragraph 5.5 above, the Company would immediately commence development (and then implementation) of a plan for the restructuring of the Company to improve its financial position (Restructuring Plan).

6.4

The directors noted that proceeding with the capital raising and negotiation with government authorities set out in Section 3 was an initial step in the Restructuring Plan.

6.5

It was resolved that the Company would appoint partners of Grant Thornton in the UK and Australia with expertise in restructuring and turnaround to advise the Company and its directors in relation to the development and implementation of the Restructuring and any required contingency planning. It was also resolved that the Company would confirm the appoint Allen & Overy LLP.”

On 5 January 2021 Mr Greensill emailed the Board of directors of GCPL, including Mr Tom Cheung and Ms Chan as Board observers, explaining BaFin’s requirements for a reduction of the GFG exposure.

On 5 January 2021 BaFin also blocked withdrawals by the Greensill Group from Greensill Bank. This affected the $250 million deposited with Greensill Bank in November 2020 from the $440 million provided under the CLNs on about 10 November 2020.

On 7 January 2021 there was a further meeting of the Board of GCPL, which the Chairman explained was to “update the board on the discussions with BaFin, the fund raising process and liquidity position of the Company …”. The minutes recorded:

“LG noted that a seller concentration reduction plan had now been agreed with BaFin. He noted that the plan reflects the plan previously agreed with the German Deposit Protection Fund in October 2020, save for two additional items: to a reduction in exposure from $4600m down to 5300m by 30 Sept 2021, and then a further reduction to nil exposure by 31 Dec 2021. LG also confirmed that it was agreed that an exposure reduction would also be made when the equity raise closes, and noted that in this regard BaFin requested that it be provided with confirmations directly from equity investors relating to the equity funding.”

At para 4.3, the minutes noted that Mr Greensill updated the Board on the implementation of CS concentration limits and that “[t]he consequence of the implementation of this guidance is that the CS SCF fund was no longer purchasing GFG and Softbank portfolio company assets, which has a potential impact on the liquidity of” GCUK. At para 4.4, the minutes noted:

“LG went on to note that CS had, immediately prior to this meeting, accepted the proposal put forward by LG to relax the implementation of CS’s guidance, save for a couple of points. LG noted that CS had agreed to suspend its new rules until the end of March. In respect of SoftBank portfolio company assets. LG noted that by this time the assets on programs with ceased funding would have amortised down to zero. In relation to GFG assets, CS had not been buying these assets from the Greensill group this week, but CS has agreed to recommence purchasing GFG assets from tomorrow…. He noted, however, that CS’s conditions were as follows: by the end of January a reduction of $100m in GFG assets was required from the level today, which equates to an aggregate reduction of $200m for January. The GFG seller concentration limit would be required to be reduced to 9% by end of March…. By 30 June 2021, the GFG seller concentration limit would be required to be reduced to 5%. Additionally, when the Company’s equity raised closes, the Company would be required to buy back $150m of SoftBank portfolio company assets. Finally, the Company would be required to grant CS a 12 month option to buy $150m shares in the Company at the same valuation as applies for the equity raise. LG expressed his view that it is unlikely that the Company would achieve a better deal with CS and that the Company should therefore accept CS’s proposal. LG added that CS were due to speak to Finma tomorrow and therefore any objections should be raised now.”

On the fundraising process, Mr Greensill updated the Board as follows:

“4.9

LG went on to provide an update on discussions with TDR. He noted that, while TDR expressed a positive view of the Company's business model, they were not comfortable with the level of exposure to the SoftBank Vision Fund (SVF) and GFG not from a credit perspective, but due to liquidity risks arising from these concentrations. TDR were concerned that there could be a run on the CS funds or the possibility that BaFin may change its position and potentially impose new or different requirements that would cause an unanticipated liquidity shock. As a result, TDR viewed the risk of investment as too high for the amount that was requested to be invested. TDR confirmed that, if they were to invest, they would require some form of liquidity protection for the group covering these two exposures. LG noted that this would need to be a significant facility, and that, while numbers weren’t discussed. his estimate was around $2bn. Given the required size, LG noted that his view was that only SVF would have the funds to provide such a liquidity facility.

[…]

4.10

LG went on to note that, following the discussions with TDR, he has had two conversations with Rajeev Misra (RM) of SVF, who indicated that the Company should prepare a proposal which quantifies the size of the liquidity facility and related exposures so that SVF could evaluate the proposal. LG noted that one beneficial element of this proposal was that the facility would be provided contemporaneously with the equity raise, resulting in a lower probability of a substantial call on the facility being made. LG observed that, even though the prospect of a credit facility from SVF would mean TDR would potentially be more interested in investing, if that liquidity facility is in place then there would be less of a need to raise the quantum of equity previously sought. A smaller equity round would therefore be possible. LG noted that CS (in its capacity as advisors in respect of the equity raise) are confident in interest from additional investors for a quantum of between $250m - $300m at the value the Company had originally been targeting. LG noted that his family holdings would also participate, as would certain other significant non-institutional shareholders, based on recent conversations he has had.

4.11

On this basis, LG noted that the Company could still achieve a $600m equity raise with the support of the liquidity facility, which would cover insured SoftBank and GFG assets. LG was careful to note, however, that this was not an agreed deal, and that AE and NG were putting together a revised sources and uses plan that would take into account the smaller equity raise and the liquidity facility.

4.13.

The chairman thanked LG for the update and noted that, based on the information that had been presented to the directors, it appeared there was still a reasonable prospect that the Company could avoid an insolvent administration or liquidation, but that it was also a realistic concern that the Company may not.”

On 8 January 2021 Mr Cheung emailed Mr Misra, stating:

“I spoke to Lex, he said he spoke with you regarding the feedback from TDR. He said you signalled you were amenable to considering us (SVF2) providing a solution here.

Tom Daula and I also spoke (and I briefed Colin). Our understanding is the following:

• TDR has expressed interest in continuing to invest in size ($1-1.5bb) if “liquidity risk of exogenous shock” on the SVF portco and GFG exposures is boxed (valuation still TBD)

• In comparison to the December proposal which was turned down, two significant conditions seem to have changed

o BaFin has provided more concrete guidance with regard to the risk selldown plan and is acting more rationally

o TDR may provide a large equity check (~$1.5bb) sitting under our new proposed liquidity facility

• A feasible solution to consider is SVF2 provides a ‘liquidity facility’ which could warehouse GFG or SVF risk if an exogenous shock occurred (e.g. Greensill misses its selldown plan agreed with BaFin) … ”.

On 12 January 2021 Mr Greensill sent Cantor Fitzgerald a business update for the Greensill Group, saying, “Please find attached the presentation we discussed. I look forward to continuing our discussion.” That business update included: “Katerra: $440m outstanding to be reduced to nil by 31 March 2021”.

On 26 January 2021 there was another meeting of the GCPL Board. Ms Chan of SBIA attended as an observer. Her notes stated, under the heading “Lex update”:

“Softbank - Rajeev called this PM, concerned that we're considering drastic options; walked through BaFin correspondence, his view / reaction was he will join Lex in meeting with Roseler next Monday to affirm SB support, that SB will help w GFG reduction plan, but Rajeev view is we need 6 months; challenge for board is we need to make decision in short run, a firm consideration of support from SB would be very important; Rajeev to revert …

TDR – reaffirmed they are keen to work with us, provided we can get them comfortable with GFG related assets that we have a resolution plan for those …”.

Her notes also stated, under the heading “Katerra”:

•

“Timing of repayment of Katerra, all held by CS Virtuoso

◦

$400M maturing in March

◦

$40M maturing in May

◦

But Greensill needs to pay full $440M by end of March

•

Cash will not be at GCUK unless we have solved GFG problem at GB

•

It’s a cash requirement at the end of May

•

If Greensill is no longer going concern, CS can still make a claim under GB insurance policy, we would need to pay $100M under the deductible, TBCC effectively would be another creditor to GCUK”.

A slide deck for the 26 January 2021 Board meeting noted, under the heading “Must Haves Q1 2021”:

“KEY GCUK OUTFLOWS

• February (Month End)

• USD 140m (CS bridge loan repayment)

• USD 125m (Insurance collateral)

• March (Mid Month)

• USD 400m (Katerra repurchase)

• March (Month End)

• USD 40m (Katerra balance)”.

On 27 January 2021 there was a further meeting of the GCPL Board. Ms Chan of SBIA again attended as an observer. Her notes stated, under the heading “Lex update”:

“Rajeev: spoke two hours ago; they are reconsidering being helpful in the short term, expecting some color on that in next 24 hours; Rajeev was clear provided our plan will get us to the finish line, he believes SB will be able to support Greensill in the near term”.

Also on 27 January 2021 Mr Daula, SBIA’s Chief Risk Officer, and Sugeet Madan attended a Zoom meeting with Divya Eapen, the Chief Risk Officer of the Greensill Group. Mr Daula’s notes included:

“Katerra $440M funds?

Was intended to repay the Katerra notes placed in CS Virtuoso.

DE - a portion is used as cash collateral at Greensill Bank. (This was placed at year-end 2020) and a portion used at GCUK to buy Liberty notes that could not be sold.

Key point is that there is no obligation any more between Katerra and Greensill, so skeptical on how the proceeds were not used to repay outstanding notes at CS Virtuoso.

Legal counsel and Lex believe that GCUK have the ability to use the cash between now and maturity of the notes in CS Virtuoso.

TD - the Katerra loan was extinguished, so how can there be insurance? Therefore how can this paper still be in Virtuoso? Greensill has no claim against Katerra.

Repayment to Virtuoso is $400M due 15-Mar and $40M due 17May. However, DE believes CS will ask for the full $440M repayment by 31Mar.

Use of the $440M is as follows:

$30M insured notes (A/R from Liberty Commodities) not sold or placed in Greensill Bank

$110M other Liberty A/R assets (Rehbein and Seaview)

$250M placed as cash collateral in Greensill Bank (a year-end 2020)

$80M cash balance at GCUK (unrestricted)”.

A note from an update call between Mr Daula and Sugeet Madan of SBIA and SBG personnel on 29 January 2021 included the following:

“Don’t use $440m raised in CLN (from Tom Daula’s team) to buy Katerra Note back. Asked Greensill whether it is acceptable, said “Katerra Note The deadline is March 2021 (S400m) No need to buy back.””

On 29 January 2021 Mr Greensill emailed Mr Misra, Mr Cheung and Mr Daula saying:

“Credit Suisse has agreed to drop their 31 January reduction requirements for Vision Fund and GFG exposures (and to increase the available GFG limit, which will free up c. $125mm of operating cash for Greensill — as we will sell them assets from our inventory) — which will enable us to continue trading with them from Monday 1 February.

The sole condition to this is that we arrange for the View Glass notes ($270mm notional) to be repurchased and settle by Friday 5 February.

Our urgent and humble request is that Softbank agree to repurchase these View Glass notes. (Credit Suisse will only recommence trading with us when they have an indication of your intent to do so.)

As you know, View Glass position is fully covered by the Softbank-Greensill CDS and these notes are required to be repurchased by View Glass upon closing of their SPAC (which will be in 4-6 weeks) – so the liquidity impact on Softbank would be short.

Given Credit Suisse’s daily execution support is mission critical – and this immediately unlocks $125mm of additional working capital for the Greensill operating company – so it is of enormous value and needed immediately for our directors to be comfortable continuing to trade”.

On the same day Mr Misra forwarded Mr Greensill’s email to Mr Cheung and Mr Daula of SBIA and Mr Goto of SBG, saying: “We should do this”. Mr Cheung responded in chain, saying: “… we think this is a prudent step to alleviate the liquidity pressure from CS, as this is essentially cash collateralizing risk that is already owned due to the CDS issued by SBG”.

On 4 February 2021 Mr Goto emailed Mr Romeih of SBIA, stating:

“Masa [Son] and Rajeev [Misra] concluded that SBG/SVF2 should NOT do anything related to this issue on the call which you were on a few days back. If you would like to save Greensill or give time to Greensill, SVF 1 should purchase those notes from CS. We heard from Rajeev that Greensill is in a serious liquidity situation which would be unlikely to be resolved. Therefore, SBG/SVF2 should not take any incremental risk. Greensill has asked for too much to SBG. They have to negotiate with CS, not SBG/SVF2.”

Later that day Mr Romeih responded to Mr Goto, saying:

“We have just been informed that the chairman, head of BoD risk committee and head of BoD audit committee have resigned. That is not public and we do not know the reasons yet, but it is an alarming development to say the least. Given your stance and the above development, we have paused on this transaction.”

On 24 February 2021 Mr Greensill emailed Mr Cheung, Ms Chan and Mr Daula of SBIA, saying:

“Credit Suisse have just sketched out a plan that they plan to take to their board for in-principle support tomorrow. It is a complete solution that sees them provide a committed underwrite of the entire GFG book for us.”

On 26 February 2021 Mr Greensill emailed Mr Misra, copying Mr Romeih, Mr Cheung, Mr Daula and Ms Johnson of SBIA and Mr Varvel and Ms Warner of Credit Suisse, saying:

“Saleh just informed me that the SoftBank Vision Fund 2 Investment Committee today declined the proposed co-purchase of $300mm of insured GFG paper (where CS was looking to take $150mm and SBVF2 a further $150mm). (CS was also planning to purchase a further $150mm of Vodafone SCF paper from us as well.)

You won't be surprised that both Credit Suisse and I are very disappointed by that decision as it undermines the necessary partnership approach which CS needs to see in order to support the planned refinancing of the GFG paper.”