A global lender that provided hundreds of millions of dollars in supply-chain financing to one of Gov. Jim Justice’s coal companies filed for insolvency protection earlier this week.
London-based Greensill Capital made the move Monday after its operations were frozen and its banking unit taken over by regulators. The Wall Street Journal reported that the 10-year-old company once was valued at $4 billion, but its value is now approximately $100 million.
The Journal, citing an internal company report, said more than 70% of Greensill’s 2020 revenue came from a handful of clients — down from 90% in 2019. The scope of those relationships is significant, when contrasted against the rest of Greensill’s roster, as it touted on its website providing “$150 billion of financing to more than 8 million suppliers and customers across more than 165 countries during 2019.”
Among those five clients is Justice’s McDowell County-based mining company, Bluestone Resources Inc. Documents reviewed by the Journal show Bluestone borrowed about $850 million from Greensill, making it one of the troubled firm’s largest clients.
The Governor’s Office did not reply to emails seeking comment Tuesday. Phone calls to the Bluestone Resources offices weren’t answered.
Supply-chain finance normally has a lender (in this case Greensill) paying a client’s suppliers quickly, and usually at a discounted price. The client would later pay Greensill the full amount of initial expenses, thus providing Greensill with a profit. Meanwhile, the client would have more latitude with its on-hand cash.
The Journal reported that Bluestone repaid a 2018 loan with a mixture of cash and $25 million in equity warrants. Those warrants provided Greensill with the right to own shares of Bluestone, but the company’s general counsel later said those equity warrants “were very soon after redeemed fully in cash.”
Any remaining money owed to Greensill by Bluestone will be directed toward whomever assumes control of the foundering company, most likely Apollo Global Management Inc., according to reports.
Insolvency isn’t to be confused with bankruptcy. The latter is to help a company repay debts. Insolvency normally leads to the liquidation of assets before dissolving the company completely.
“Normally, what happens is, the loan is transferred to another lender, so the terms and conditions will be the same,” said Dr. Suvayan De, an economist at the University of Charleston’s School of Business and Leadership. “There could be a grace period ... but it doesn’t mean the loans are forfeited. It still has to be paid, even if my lender [collapsed].”