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What went wrong at Greensill Capital?

Greensill Capital (a UK based supply chain finance company founded in 2011) filed for insolvency protection on March 8, 2021, having raised over $2 billion in capital.

Supply Chain Finance is a wonky subject. If you talk about it at a cocktail party people look over your shoulder to find somebody more interesting to talk to. Smooth talking hustlers find a way to sex up such wonky subjects. Think of Elizabeth Holmes (Theranos) in blood tests, Ken Lay (Enron) in utility deregulation and Adam Neumann (WeWork) in office rents. Now we can add Lex Greensill in Supply Chain Finance to that list.

Greensill Capital is a big story, already covered in a lot of pixels. At Daily Fintech we aim to dig below the headlines to find out what is really going on ie to add value not just “content” as we have done many times on the subject of Supply Chain Finance. See here for all posts tagged supply chain finance.

So I indulged my inner wonk to find out what went wrong at Greensill Capital, looking at 5 theories:

There are a couple juicy subplots:

The  main story is simple – quality of execution matters.

Apart from the fact that  a high profile company went bankrupt, a lot of reputations have been damaged:

Here are the reputations that emerged relatively unscathed and are even possibly enhanced:

To help me understand the banker’s perspective I approached (American translation = “reached out to”) Howard Tolman, a Banker and technology entrepreneur, who now curates the Alt Lending news for Daily Fintech:

Howard focussed in our conversation on an old fashioned banking discipline – assessing credit quality. As Howard put it to me

“relying on auditors or the reputation of the bank packaging the asset for sale is horribly reminiscent of selling low credit quality mortgages as triple A. Different asset of course but the two dogs are related”. 

Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.

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