Relevant Document:
Skeleton Argument
Directors of Greensill Capital (UK) Ltd. (GCUK) and Greensill Capital Management Co. (UK) Ltd. (GCMC) today made an application before the English High Court for the appointment of administrators.
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Justice Green was satisfied that administrators Grant Thornton could be appointed, noting that the group’s $140 million Credit Suisse facility has been accelerated.
The two companies explained that they have fallen into severe financial distress and are no longer able to pay their debts. (GCUK has effectively ceased trading and its loan facilities have been accelerated and the lenders have taken enforcement action against GCUK’s assets.)
The companies’ directors are of the view that it is necessary for the companies to enter into an orderly insolvency proceeding as soon as possible and that an administration would provide the group’s creditors with a better outcome than liquidation.
Grant Thornton, as proposed administrators, have also negotiated a sale of part of the business to a third party purchaser, which it intends to complete as soon as possible after it is appointed. The court heard that Grant Thornton has been engaged since December 2020.
Apollo has made an offer to acquire the companies’ intellectual property and IT systems (and to take on the majority of GCMC’s employees). The offer includes a large element of cash consideration, with $57.3 million to be allocated to GCUK and $2.3 million to be allocated to GCMC.
David Allison QC represented the company, instructed by Allen and Overy. Davies QC represented Credit Suisse Asset Management and four investment funds, separate to Credit Suisse AG. Robin Dicker QC appeared for Apollo.
GCUK has the following financial indebtedness:
- GCUK is a guarantor of certain loans borrowed by Greensill Pty from Credit Suisse AG (Credit Suisse) and Peter Greensill Family Co. Pty Ltd. (PGFT).
- A $140 million term loan facility agreement with a contractual maturity date of Oct. 19. The Credit Suisse facility is guaranteed by GCUK, among others, and is secured by a floating charge over the credit balance of a specific bank account and certain receivables beneficially owned by GCUK (the CS Secured Assets). In addition, Credit Suisse holds security over the share capital of GCUK.
It is explained in the companies’ skeleton argument that GCUK owns valuable assets which are not secured in favor of Credit Suisse (and thus do not form part of the CS Secured Assets). In particular, the intellectual property of GCUK and the IT systems of GCUK (which comprise its fintech business) are not the subject of any security. It is expected by the group that the proceeds from the sale of these assets will therefore be available to unsecured creditors of GCUK.
The skeleton also explains that Credit Suisse does not hold any security over the assets of GCMC.
There is a further facility with Greensill Pty (as borrower) and PGFT (as lender) containing a $60 million term loan facility agreement (the PGFT Facility) with a contractual maturity date of Oct. 19.
The PGFT Facility is contractually subordinated to the Credit Suisse Facility and is guaranteed by GCUK, among others. The PGFT Facility is secured by a second-ranking floating charge over certain receivables beneficially owned by GCUK. As explained below, each of Credit Suisse and PGFT has consented in writing to the appointment of the proposed administrators.
The Bank of England has been notified of proceedings and does not oppose the application.
On March 1, GCUK lost the benefit of $4.1 billion of credit insurance. This insurance had provided protection against the risk of non-payment by non-investment grade debtors under its financing programs. Non-investment grade receivables are responsible for about 90% of GCUK’s revenue. The lack of suitable credit insurance has rendered GCUK’s business unviable. As a result, GCUK ceased trading with effect from March 2.
Between March 4 and 5, Credit Suisse served a series of notices on GCUK and Greensill Pty.
The effect of those notices was to accelerate the Credit Suisse Facility and to demand immediate payment from GCUK (as guarantor) of the entire outstanding amount of $140 million plus interest.
David Allison QC told the court that GCUK is unable to pay this sum and is therefore cashflow insolvent.
-- Shan Qureshi, Connor Lovell