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As Sanjeev Gupta rose from trader to tycoon, several banks declined

(Bloomberg) – The businesses of British industrialist Sanjeev Gupta seemed to be thriving until its main lender, Greensill Capital, imploded last month. But long before Greensill collapsed, several banks had shut down Gupta’s Liberty House Group’s commodity trading activities. Four banks stopped working with Gupta’s commodity trading business, starting in 2016, after worrying about what they saw as issues with bills of lading. – shipping receipts entitling the holder to take possession of a load – or other paperwork provided by Liberty, according to interviews with 18 people directly involved in the trade, as well as internal communications seen by Bloomberg News. The banks include Sberbank PJSC, Macquarie Group Ltd., Commonwealth Bank of Australia and ICBC Standard Bank. Goldman Sachs Group Inc. Also stopped the Gupta companies around that time. In 2018, Sberbank sent a team to scour the brightly colored containers piled up in the port of Rotterdam in search of the nickel containers the bank had funded on its behalf. Freedom. But every time investigators found one of the containers, they found it had already been emptied, according to two people involved in the case. After checking about 10 of them, they gave up, people said. Sberbank confronted Gupta weeks later at a meeting. He promised his company would pay back the roughly $ 100 million it owed, the people said. “At one point, certain discrepancies were noticed in the documentation and logistics data, causing Sberbank to cease all activities with the company,” the bank said in an email. statement. “The matter has been dealt with in the form of a preliminary investigation. Thanks to the existing control systems, we did not incur any financial losses from these operations and we managed to close all transactions by spring 2019. GFG Alliance, which consists of the companies controlled by Gupta and his family, including Liberty, said in an emailed statement from a spokesperson that it refutes any suggestion of misconduct. “An internal investigation was conducted in 2019 by Liberty Commodities Limited (LCL) outside legal counsel in response to inquiries into alleged double promise rumors,” GFG Alliance said in the ruling. “The investigation found no evidence to support the rumors, nor was LCL ever subject to further complaints or litigation.” Double pledging is the practice of improperly raising money multiple times with the same collateral. When several banks dropped Gupta’s commodity trading unit, GFG Alliance relied more on Greensill Capital for loans – eventually reaching nearly $ 5 billion in debt to Lex Greensill’s trade finance company by March 2021, according to a Bloomberg News presentation. Gupta’s commodities trading business alone is indebted $ 1.04 billion, of which $ 846 million is due to Greensill, the presentation said. “LCL has ongoing banking relationships with individual financial institutions,” GFG Alliance said in the statement. “The reliance on Greensill was a natural consequence of the competitive nature of the trade finance market, which has been a tremendous challenge for all but the very largest commodity traders in recent years.” Now, with Greensill in insolvency and its German subsidiary under a criminal complaint after the regulator said it discovered irregularities in the way the banking unit booked assets linked to GFG Alliance, Gupta is trying to find new funding. But it has been difficult. After Gupta spent weeks looking for potential backers, Credit Suisse Group AG – which became a major lender to Gupta’s businesses by buying Greensill-packed debt – last month acquired Liberty Commodities Ltd. bankruptcy. Gupta said in interviews on BBC Radio 4 and Sky News on April 1 that the action was pointless and that he would sue if necessary. their journey from origin to destination. From the point of view of the banks, this type of financing is generally considered to be low risk. Should the merchant run into financial difficulties, the bank can seize his collateral – the cargo – and easily recoup his money. This applies as long as the shipping paper used, such as a bill of lading, is correct. ICBC Standard Bank ceased financing Liberty’s commodities trading unit in early 2016 after discovering that it had handed the bank what appeared to be double bills of lading. , according to two people with direct knowledge of the matter. The Commonwealth Bank of Australia pulled the plug from lending to Gupta’s trading business the same year after the bank funded a shipment of metal for Liberty, but a short time later she got what appeared to be the same bill of lading from another trader looking for a According to three directly involved, Goldman Sachs, which had provided Liberty with a line of credit of approximately $ 20 million to finance its nickel business, closed down Gupta’s trading company in late 2016 after being warned of alleged paperwork problems by a contact in the warehousing industry, according to three. people familiar with the case. spokesmen for Goldman Sachs, Commonwealth Bank of Australia and ICBC Standard Bank all declined to comment. to LCL, “GFG Alliance said in the statement, referring to Liberty Commodities Ltd.” On the contrary, they have received significant commercial proceeds. Advertisement has already become one of the world’s largest nickel traders, according to an interview with Gupta in Metal Bulletin. Still, at times, Liberty ‘s nickel containers would sometimes take an unusually long time to travel between Europe and Asia – instead of the normal transit time of about a month, the trip would take several months, stopping in ports for weeks at a time, six people said.Metal trader Red Kite Capital Management, which also cut ties with Liberty, did so because it had become “uncomfortable” with some of the transactions. said Michael Farmer, the company’s founder who is also a member of the UK’s House of Lords. “said Farmer, one of the world’s best-known metal dealers.” We had no evidence of any crime. “SteelGupta rescuer was born in Punjab, India, a ls son of a bicycle manufacturer. He moved to the UK as a teenager to attend boarding school and in 1992 founded Liberty House, his commodities trading company, while still a student at Trinity College, Cambridge. He first made headlines in Britain in 2013 when he bought a troubled steel mill in Newport, South Wales, and restarted production at a time when many other steel mills were closing. He then bought a series of other struggling steel mills, earning him the nickname “the savior of steel”. Gupta’s GFG alliance is not a consolidated group, but a loose conglomerate of more than 200 different entities. The common thread running through both sides of his company, according to six former employees, was a chronic cash shortage and a lot of pressure to find new ways to find financing. On the industrial side of the business, that meant buying one after the other in rapid succession, including unloved aluminum and steel mills in Yorkshire, England, Northern France and South Australia, and then borrowing against own inventory, equipment and customer invoices from the company, often from Greensill. On the trading side of the business, that often meant nickel. Nickel, which is used as an alloying element in stainless steel production, is one of the metals that can be provided on the London Metal Exchange, meaning that the price can be easily hedged and banks are usually willing to lend against it; and nickel is expensive, meaning that a relatively small amount of space in a ship can hold a valuable supply of metal. The trade in commodities grew rapidly. Sales increased from $ 1.67 billion in 2012 to $ 8.41 billion in the 15 months to March 2019, according to the accounts of Liberty Commodities Group Pte, a Singaporean trading holding company. Delayed Delivery Macquarie was concerned about the paperwork underlying some of Liberty’s transactions. About four years ago, according to four people with direct knowledge of the events and written statements seen by Bloomberg News. in one case, the bank realized that the nickel it would have received in Antwerp, according to shipping documentation, was not in port, according to two people. Liberty eventually delivered the nickel to Macquarie, but at a different port and about two weeks later than stated in the paperwork. It wasn’t the only time Macquarie’s team had discovered discrepancies in Liberty’s paperwork, the people said. The London offices, bank executives let Gupta and his top lieutenants know how commodities trading works, three of the people said. Macquarie remained unhappy with the explanation, and in mid-2017, the bank had made a decision to cut all funding for Liberty, people said. A Macquarie spokesman declined to comment on the matter. companies turned to Sberbank. When that link soured too, they became even more dependent on Greensill. Visit us for more articles like this at bloomberg.com.

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