Italian bank collapses amid exposure to Greensill and GFG
Before its collapse in March, Greensill loaned money to companies, including the metals group GFG Alliance of Sanjeev Gupta, by accepting bills in exchange for cash. The loans were then consolidated into notes and sold to banks and other investors. “The intervention of Banca Ifis makes it possible to avoid the serious social and economic consequences of the situation which has arisen at Aigis Banca due to the latter’s exposure to Greensill Bank,” said Frederik Geertman, Managing Director of Banca Ifis.
Gupta’s GFG alliance relied heavily on funding from Greensill, and the fundraising group’s collapse left the sprawling metal conglomerate on the brink of collapse. The BaFin document shows that German officials held a conference call in October with the Bank of Italy and the European Central Bank “about the proposed acquisition by Sanjeev Gupta of a significant stake in the Italian GBM Banca “- the old name of Aigis before it was renamed late last year.
Last year, Gupta began talks to buy a stake in Aigis Banca, majority-owned by private equity firm Metric Capital, according to people familiar with the matter and a document from German financial regulator BaFin. At the time, BaFin was investigating Germany-based Greensill Bank, focusing on its high level of exposure to Gupta’s business. The bank went bankrupt in March and German regulators filed a criminal complaint against its management on suspicion of balance sheet manipulation.
Aigis Banca’s problems stemmed from investment proceeds linked to invoices it had purchased from Greensill, according to people familiar with the matter. These included asset-backed notes linked to Gupta’s Metals Empire, with a document seen by the FT showing the bank had exposure related to its Liberty Commodities business. With GFG defaulting on its debt to Greensill, loan buyers, including Credit Suisse’s asset management arm, face heavy losses.
Wyelands Bank announced earlier this month that it would be sold or liquidated, after its accounts revealed that repayments of 80% of its loan portfolio were overdue. The Bank of England ordered Gupta’s bank to repay customers’ deposits in March, amid growing concerns over its financial situation. In addition to using Greensill as a source of funding, Gupta had its own bank in the UK called Wyelands Bank. He was looking to acquire a stake in Aigis at a time when Wyelands was under increasing pressure and control from regulators.
While the investment products that Aigis purchased from Greensill were covered by insurance policies, they have yet to be paid for, people familiar with the matter said. Banca Ifis said it took over € 298 million in loans and € 135 million in Italian sovereign bonds from Aigis, as well as € 440 million in deposits from its clients. The bank added that “securities related to Greensill” were excluded from the transaction. The Italian Interbank Deposit Protection Fund also provided 49 million euros to support the transaction. Greensill and Gupta’s GFG Alliance declined to comment.
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