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The Greensill Bank entrance in central Bremen, Germany, July 3 2019. Picture: REUTERS/Fabian Bimmer
The Greensill Bank entrance in central Bremen, Germany, July 3 2019. Picture: REUTERS/Fabian Bimmer

London — Collapsed lender Greensill Capital said it received “political steers” that its loans to steel businesses controlled by Sanjeev Gupta and his family were welcome, an investigation by the National Audit Office found.

Representatives of the London-based company told officials from the UK government-controlled British Business Bank that was the reason Greensill had lent so much money to firms in Gupta’s GFG Alliance, according to a report published on Wednesday.

British Business Bank had granted Greensill the ability to make £400m of loans with guarantees from the government under a pandemic relief programme.

A combined £350m pounds was extended to companies in the GFG Alliance, including six loans totalling £300m on one in Sept. 2020, the audit office said, citing a British Business Bank review.

Greensill collapsed in March after a key partner refused to extend crucial trade credit insurance that backed loans it made to a number of borrowers. The proximity of both Greensill and Gupta to parts of the UK government then came under the spotlight. There are at least 10 inquiries and investigations into the affair, some of which concern lobbying and access to powerful decision makers in the British establishment.

At the height of the pandemic last year, the government and British Business Bank launched emergency lending programmes to support companies struggling with the fallout of the lockdown.

Greensill was an accredited lender through two of those programmes: the Coronavirus Business Interruption Loan Scheme, or CBILS, and Coronavirus Large Business Interruption Loan Scheme, or CLBILS. Greensill was the fifth-largest CLBILS lender by value, and accounted for 8% of the total value of loans guaranteed, according to audit office’s findings.

The process of accrediting Greensill for the programmes garnered what British Business Bank officials regarded as an “unusual” level of interest from the UK’s Department for Business, Energy and Industrial Strategy (BEIS), the investigation found.

Staff at BEIS asked if Greensill could be permitted to lend more than the maximum £50m to a borrower and asked for the decision to be given priority, the audit office’s report said. Greensill was limited to that amount under its guarantee from British Business Bank.

A BEIS spokesperson said there “is no suggestion whatsoever” that ministers or officials sought to influence British Business Bank’s decision. All decisions by the bank are made independently, the spokesperson said.

The opposition Labour Party, though, said the audit office’s report raises questions about government involvement. “The level of access Greensill Capital had to ministers is deeply concerning,” Seema Malhotra, the party’s spokesperson for business, said. “Now the plot thickens with reports of rules being bent and requests fast-tracked.”

Emails sent to British Business Bank confirmed that Liberty Steel, part of GFG, was lobbying the department to help Greensill provide it with finance, including suggesting that Greensill be given a bespoke guarantee to lend to the metals conglomerate, the report said.

After a review, British Business Bank’s legal team concluded that external parties hadn’t influenced the accreditation of Greensill.

But officials became concerned in October that Greensill may have broken the conditions of the guarantee by lending too much money to GFG and called several meetings. In early March, days before Greensill filed for insolvency, British Business Bank wrote a “letter of concern” to the lender and suspended its guarantee on the loans it made.

Greensill made eight loans in total under the programme, seven of which went to GFG companies. Grant Thornton, Greensill’s administrators, in April told British Business Bank that it rejected the allegation that it had violated the terms of the programme, according to the report.

The other loan was to Aar Tee Commodities. British Business Bank noted that the owner of the company was previously a board member of GFG’s charitable foundation and GFG’s strategic board. The bank sent a further letter of concern to Greensill regarding this loan, the report said.

The bank struggled to verify some of the information that Greensill provided as part of its application to make loans under CBILS, as the lender had not published its audited accounts at the time. The priority, bank officials said, was to give the guarantees to lenders who could reliably deliver money to borrowers quickly, instead of auditing each institution before admitting them to the programme.

“Sadly, it is clear that some of this mess could have been avoided with more thorough due diligence on Greensill upfront,” Meg Hillier, an MP and chair of the Public Accounts Committee, said in a separate statement. “There are important lessons for the government.”

Bloomberg News. More stories like this are available on bloomberg.com

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