Australian insurance agency Bond & Credit Co arranged $10bn of coverage for Greensill, which specialised in supply chain finance and collapsed into administration in 2021 after its insurance expired.

BCC, which is owned by Japanese group Tokio Marine, has targeted the “commercially unsupportable” fee in its latest filing in Australian court proceedings that bring together a series of insurance claims by Greensill investors who lost billions of dollars.

Greensill’s insurers, which include BCC’s former parent Insurance Australia Group, Tokio Marine and Zurich are refusing to pay out on the company’s credit cover. 

BCC has argued that Greensill “fraudulently misrepresented” material matters and its insurance is therefore void.

In a recent filing, seen by the Financial Times, BCC argues Greensill was responsible for “misrepresentations and non-disclosures” in relation to financing for Catfoss, a company engaged in building projects at NHS hospitals in Derby, Dorset and Essex.

According to BCC, Catfoss paid Greensill a £10.4mn structuring fee for the financing, which was “in excess of any fee that would be negotiated by parties in a bona fide arms’ length relationship”.

BCC also said the “disproportionate” fee had been paid out of a lending facility that only amounted to £15.3mn.

It also alleges Lex Greensill, founder and CEO of the business, presented the facility as short-term supply-chain financing, while in reality it was working capital financing with terms of “up to two years”.

In one case, Greensill was “continuing to advance funds . . . and seeking insurance for those advances, even though the relevant NHS Foundation Trust project had been completed in January 2019”, the filing states.

The material was included in an annexe that BCC is using in multiple Greensill legal proceedings, including a case brought by investment firm White Oak, which is suing insurers in London and Australia over losses on loans arranged by Greensill.

Greensill’s involvement in a number of financing schemes linked to the NHS fuelled the political furore surrounding its collapse in 2021. Former UK prime minister David Cameron was an adviser to the business.

Catfoss is part of a network of companies connected to UK businessman Andrew Foreman. Earlier this month, Foreman finalised an individual voluntary arrangement, an individual insolvency process that allows for the repayment of creditors over time. In the past nine months, a number of his businesses have been placed in company voluntary arrangements, a form of corporate insolvency.

“Since the Greensill collapse it has been the most horrendous 2.5 years of mine and my family’s lives,” Foreman wrote in a letter to a group of his creditors this month.

“But with the support of the CVAs and IVAs this is allowing me and my family to try and recover the best possible return for all parties.” 

Tokio Marine, White Oak, IAG and a spokesperson for Lex Greensill declined to comment. Foreman said he had no additional comment.

This story originally appeared on: Financial Times - Author:Robert Smith

Assured Guaranty could end up having to pay out to lenders if companies such as Thames Water and Southern Water default or fail to make interest repayments. UK water utilities, under pressure from rising inflation and increasing regulatory scrutiny, are labouring under £60bn of debt. 

“We feel the UK water company debt we have insured has a strong credit profile, as it provides an essential public service and is in a well-regulated industry where we guarantee the senior level debt, all of which has underlying investment grade ratings,” Nick Proud, a senior managing director at Assured Guaranty, said in an emailed statement. “To date, a UK water company has not defaulted on their debt.”

Assured Guaranty typically works with lenders financing US municipal government-backed infrastructure projects, providing insurance which pays out to debt investors if a borrower defaults.

The products can help boost the credit rating of bonds and encourage lenders to back companies that might otherwise struggle to raise financing. When triggered, the insurance is structured to pay out over time, mirroring how the loans being covered would be repaid. 

However, the group has also built up about $1.9bn in exposure to Thames Water alone, with Southern Water its largest non-US exposure at $2.2bn, according to results published in March. Anglian Water, Yorkshire Water and Dŵr Cymru Welsh Water are all among their top 10 non-US holdings, the results show.

Assured Guaranty has been ratcheting up its activity in the UK water sector over the past 18 months, striking a new deal to provide cover to lenders to Portsmouth Water in June and last year agreeing to provide liquidity facilities to Yorkshire Water. 

Rating agency S&P has negative outlooks for about two-thirds of the UK water companies it rates — indicating the possibility of downgrades if financial performance worsens.

The UK government was said to have discussed plans to put failing water companies into a “special administration regime”, with Thames Water front and centre of discussions after the abrupt departure of its chief executive last month. 

UK water regulator Ofwat is closely monitoring the financial health of five UK companies — Thames Water, Southern Water, SES Water, Portsmouth Water and Yorkshire Water.

Thames Water, Southern Water and Yorkshire Water have all secured commitments from shareholders to put in hundreds of millions of pounds of additional investment in recent weeks in a bid to shore up their finances. 

The crisis prompted some lenders to Thames Water, England’s largest privatised water facility, to hire advisers to assess their options if the business was placed into special administration. 

“Our role has very much been holding the hands of anxious investors,” Jennifer Marshall, a partner at law firm Allen & Overy, said. “So far . . . there haven’t been any defaults. At this stage, it’s contingency planning and people trying to understand their rights.”

Fitch Ratings downgraded Southern Water’s credit rating on Friday, while maintaining a negative outlook, noting a number of challenges for the business including “high interest costs and a long-dated derivatives portfolio with meaningful mark-to-market liabilities”.

Assured Guaranty’s exposure to UK water companies is nearly equal to the group’s total “claims-paying resources”, which stood at $10.8bn at the end of March. It reported net income of $124mn last year.

Proud said that Assured Guaranty had a “long history of successfully mitigating potential losses”, however, and noted that the group had maintained “a relatively constant level of claims paying resources over the past 15 years”.

The insurer carries strong credit ratings of AA and A1 from S&P and Moody’s respectively, with the latter citing its “strong capital profile” and “conservative underwriting”. 

So-called monoline insurers like Assured Guaranty typically provide insurance to securities backed by governments, meaning it is unlikely that the borrowers will default on their loans. In the US, its largest exposures included the state of New Jersey and the Port Authority of New York. 

The products it sells were popular before the global financial crisis but lots of providers blew up after writing large amounts of insurance for securities backed by subprime mortgages, among other things.

This story originally appeared on: Financial Times - Author:Robert Smith

The suit in London from White Oak’s European arm, detailed in a filing seen by the Financial Times, marks the latest legal fallout from the failure of the business led by Lex Greensill and advised by former UK prime minister David Cameron following the lapsing of its insurance.

This story originally appeared on: Financial Times - Author:Robert Smith

Babylon said on Wednesday that London-based credit fund AlbaCore Capital is carrying out “a restructuring and recapitalisation” of the business.

This story originally appeared on: Financial Times - Author:Robert Smith

Greg Brereton, who worked for Sydney insurer Bond & Credit Co, set out his defence in a court filing in response to a case brought by US investment firm White Oak, which bought some of the debts owed to Greensill Capital by steel group GFG Alliance, against Australian insurer Insurance Australia Group.

It is the first time that Brereton has issued any statement on the collapse last year of SoftBank-backed Greensill Capital following the cancellation of its insurance cover.

This story originally appeared on: Financial Times - Author:Robert Smith