Six of the seven loans that Greensill Capital gave to Sanjeev Gupta’s business empire were provided on the same day, new documents show.The six loans could cost the taxpayer up to £240 million and were so concerning to officials that they paused all government-backed lending by Greensill just days later.
During the COVID-19 pandemic the government said it would back loans to large companies under the Coronavirus Large Business Interruption Loan Scheme (CLBILS).
Accredited lenders, among them Greensill, were allowed to provide loans of up to £50 million ($69 million) to companies.
But without special permission they were banned from giving more than £50 million to a group of businesses by lending to different subsidiaries.
This was made clear to Greensill in May when the British Business Bank explained—using a different steel company as an example—that, “British Steel would be one group with a £50 million limit, and it is not a £50 million facility limit per subsidiary.”
Greensill even applied to lift this limit, but was turned down.
Yet all but one of the companies Greensill lent to were part of the GFG Alliance, which includes Liberty Steel.
GFG is an unusual collection in that the firms are linked through their ownership by Gupta and his family, but they are not formally part of a group.
In total, GFG’s companies were paid £350 million ($482 million) across seven CLBILS loans from Greensill.
It represents all but one of the CLBILS loans that Greensill paid out.
The final Greensill loan was given to a firm whose director used to work at GFG companies.
Now a report from the National Audit Office (NAO) shows that all but one of these seven loans to GFG were granted on Sept. 30.
Just two days later this raised flags at the British Business Bank, which oversaw the scheme.
By Oct. 13 the officials had slashed the amount that Greensill could lend under the scheme to zero.
The officials worried that by giving several loans to companies in the GFG Alliance, Greensill may have potentially broken the rules of the loan scheme.
Greensill denied wrongdoing.
But at a meeting with bank officials on Oct. 13, Greensill said that “it had received ‘political steers’ that its support for the steel industry was welcome,” the NAO report reads.
The British Business Bank acknowledges, as the report does, that in the case of Greensill, applying a less streamlined process might have led the bank to further question Greensill’s application.
The bank told the NAO that the Department for Business, Energy, and Industrial Strategy had shown an “unusual” level of interest in Greensill’s accreditation.
In an email dated June 9, 2020, one BEIS official said that “unfortunately, Spads are pushing back and want information about when Greensill will be accredited to offer loans of up to £200 million.”
Spads are special advisers appointed by ministers whose role is political.
Unusually, all of Greensill’s CLBILS loans were for the maximum allowed under the scheme.
Although banks could provide loans of up to £50 million that would be backed by the government, most did not.
In fact only 17 of 698 CLBILS loans were for the maximum amount—eight of these were from Greensill.
The remaining nine loans that hit the maximum were issued by five different lenders. The average loan size was for CLBILS was £3 million ($4.1 million).
The report also revealed that Greensill had sought a £500 million ($690 million) loan from government body UK Export Finance.
UKEF turned down the application, concerned about press reports surrounding Greensill and whether the proposal aligned with its goals.
In recent months it has been disclosed that David Cameron, who worked for Greensill, sent dozens of texts to ministers and civil servants during the early days of the pandemic.
He was lobbying for Greensill to be given access to a separate Bank of England-backed loan scheme.
The audit office said that if the British Business Bank had not been in such a hurry to get money through the door during the pandemic, it might have taken the time to question Greensill’s claims before accrediting the lender.
These claims include those on “loan default rates; exposure to specific borrowers and product types; and its business model and ethical standards. Each were the subject of press reports prior to accreditation,” the NAO said.
It gave the bank credit for picking up the potential breaches quickly after the loans were made.
British Business Bank CEO Catherine Lewis La Torre said: “The British Business Bank acknowledges, as the report does, that in the case of Greensill, applying a less streamlined process might have led the bank to further question Greensill’s application.
“A less streamlined accreditation process would, however, have been lengthier, meaning that fewer lenders may have been accredited, and fewer businesses would have received the critical finance they needed.”
