Another SoftBank Unicorn Gets in Trouble: “Reverse Factoring” Specialist Greensill
“Its track record of disrupting traditional financing” hit by fallout from client companies that suddenly collapsed under undisclosed debts. Tentacles spread to Credit Suisse.
SoftBank appears to have a brand new problem on its hands: UK-based unicorn Greensill. Last year, SoftBank’s Vision Fund invested $1.45 billion in two rounds in this company. The second round pushed its “valuation,” decided behind closed doors, to $6 billion. The stated purpose was to allow Greensill to continue “its track record of disrupting traditional financing.”....MUCH MORE
Greensill provides supply chain financing in form of “reverse factoring” which can be used by companies to create the illusion of cash flow, reduce the appearance of debt, and mask the true state of their leverage ratios. Three of Greensill’s reverse-factoring client companies — NMC Health, rent-to-own retailer BrightHouse, and Singapore commodities trader Agritrade — have spectacularly collapsed over the past three months, under billions of dollars of undisclosed debts and amid red-hot accounting scandals. And the tentacles have spread to Greensill’s and SoftBank’s relationships with Credit Suisse:
NMC Health, which in early March we dubbed “the first Enron” of 2020 after the UAE-based FTSE 100 health care company suddenly “discovered” $2.7 billion of undisclosed debt, on top of its $2.1 billion of disclosed debt. Since then, an additional $1.8 billion of heretofore hidden debt has been unearthed, taking the company’s total debt load to $6.6 billion.
BrightHouse, the UK’s largest rent-to-own lender whose business model essentially consisted of providing finance rental agreements to cash-strapped consumers. Those consumers ended up owning the products they rented as long as they were able to endure the long payment periods and exorbitant interest rates, which could reach as high as 69.9% APR. Many did not. The UK government’s announcement of a three-month payment freeze on rent-to-own loans in April, as part of its Covid-19 measures, was the final straw for Brighthouse, which already faced millions in compensation claims....
