Greensill collapse sparks Australia contagion fears as unions eye steel jobs

The collapse of Bundaberg entrepreneur Lex Greensill’s global financing firm has sparked contagion fears in Australia, with concerns thousands of local steel jobs could be at risk and major insurer IAG forced to soothe market jitters about its exposure.

Greensill Capital, the high-flying, London-based supply chain financing firm that was last year valued at $US7 billion ($9 billion), appointed administrators in England and Australia on Tuesday after it lost the support of its key financial backer, investment bank Credit Suisse. The rise and sudden fall of the firm, which counted former UK Prime Minister David Cameron and former Australian foreign minister Julie Bishop among its advisers, has shocked investors.

Greensill, which was preparing for a sharemarket float as recently as October, provides a controversial service known as supply chain financing, buying invoices from big companies and paying their suppliers early for a fee.

Greensill then arranges for those payments to be packaged up and rolled into securities that are then sold by Credit Suisse.

The company’s biggest customer is British billionaire Sanjeev Gupta who owns the Whyalla steel mill in South Australia. Greensill has estimated as many as 50,000 jobs globally, including 7,000 in Australia, could be at risk from its collapse by reducing the flow of funds to its customers.

Leaders from the Australian Workers Union have been in rolling meetings with Mr Gupta’s local representatives amid concerns about the facility’s future. “Our members have worked extremely hard to get these steel operations humming and profitable and they don’t deserve to be swept up in all this,” AWU national secretary Daniel Walton said.

Separately, IAG was forced to update the market after its shares tumbled 10 per cent amid concerns, first revealed by The Age and The Sydney Morning last week, of its exposure to Greensill. Shares of IAG, which operates insurance brands including NRMA and CGU, recovered slightly after it denied exposure but still closed down 4 per cent as investors digested the news.

Founded by Bundaberg raised Lex Greensill in 2011, the eponymous financing firm had grown in just ten years to be a sprawling international financial services house. The success vaulted Mr Greensill and his two brothers Peter and Andrew into the nation’s financial elite, with their combined wealth estimated at more than $1.3 billion.

Mr Greensill’s family was already well known in Bundaberg where it owns a sprawling farming empire. The family company confirmed this week it was not under any financial pressure.