The crash of Greensill capital became one of the most impressive financial events last year.
The company based in UK and Australia tried to resolve the supply chain controversy. Sellers typically want to get cash as soon as possible, while buyers do their best to postpone the money transfer after making the purchase. Greensill became an intermediary in this process, receiving its commissions on each transaction.
Part of the risk was put on insurance companies and other intermediaries. For example, Greensill turned the supplier invoices into short-term assets that investors could buy. Some Credit Suisse funds purchased them and offered these assets further to private investors via their own funds’ management firm GAM.
In March 2021 it turned out that too much of Greensill’s activity focused on so-called ‘future accounts receivables finance’. To put it straight, Greensill created too many financial instruments that had imaginary to-be-signed-in-future contracts as underlying assets.
It all collapsed when insurance companies refused to prolong their cooperation with Greensill.
Looks like what’s done by night appears by day even if you’ve managed to make friends with a Swiss bank’s top manager.
Source: nytimes.com
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