General Atlantic is borrowing €300m from Goldman Sachs at a double-digit interest rate in order to repay a controversial loan and distance itself from collapsed group Greensill Capital, according to two people familiar with the matter.
The move will allow the US private equity firm to repay a €300m loan that it took out in 2019 from Greensill, in which it also owned a stake and had a board seat, as it seeks to end a chapter of its relationship with the finance start-up.
However, the deal with Goldman comes at a cost, with General Atlantic on the hook for an interest rate of about 10 per cent, the people said.
The $50bn investment group had not repaid any of the loan, which was set up to last “in perpetuity” unless cancelled, when Greensill went into administration last month, one of the people said.
While there was no immediate repayment deadline, General Atlantic wanted to refinance the arrangement after Greensill’s collapse in order to manage reputational risk, they added. Greensill made part of the loan through its German banking subsidiary, whose management is now under criminal investigation.
The demise of Greensill, which is at the centre of a growing financial and political scandal, has shone a harsh light on the involvement of the private equity firm, which became its first major outside backer with a $250m investment in 2018.
The backing of General Atlantic, which had previously built a reputation as a savvy technology investor with bets on companies such as Alibaba and Airbnb, paved the way for SoftBank’s Vision Fund to pump $1.5bn into Greensill the following year.
Former British prime minister David Cameron, who has been dragged into a lobbying scandal because of his work for Greensill, cited General Atlantic’s investment in his first public statement on the affair last week, calling the private equity firm “one of the most respected international backers of tech sector companies”.
General Atlantic funnelled the original Greensill loan through a series of holding companies and used it to buy a minority stake in two financial services and software businesses, Stoxx and Axioma, in a joint venture with the stock exchange operator Deutsche Börse.
The loan was made against the companies’ future revenues, according to documents seen by the Financial Times. General Atlantic was due to pay interest on it “semi-annually”, the documents said, but they did not specify a rate.
The new loan is from a unit of Goldman Sachs’ asset management arm that invests the bank’s own money and that of its investors.
Deutsche Börse, General Atlantic, Greensill and Goldman Sachs declined to comment.
The original loan was flagged as part of an internal investigation by the insurance group Tokio Marine, whose decision to pull coverage of Greensill helped trigger its collapse.
It was packaged up into bond-like investments sold to clients of Credit Suisse, which is facing expected litigation over its now-suspended $10bn Greensill-backed supply chain finance funds.
General Atlantic’s decision to refinance the loan may enable some funds to be returned to those investors. Credit Suisse has returned $4.8bn to investors, but the bank has said there is “considerable uncertainty” over much of the funds’ remaining assets.
The arrangement General Atlantic had was unusual both by the standards of typical private equity borrowing and by the standards of “supply-chain financing”, the corporate funding model that Greensill championed.
Private equity groups are typically able to borrow money to buy majority stakes in companies at much lower rates, with yields averaging 2.5 per cent on an index of European high-yield corporate bonds, but it is more difficult and less common to borrow against target companies’ future revenues to take minority stakes.
Traditional supply chain financing deals are short-term corporate funding arrangements based on invoices due for payment. Unlike those deals, the General Atlantic loan was set up to last “in perpetuity” unless cancelled, using a mechanism called “cashless rolls”. The earliest the loan could be cancelled was after three years.
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April 15, 2021 at 12:21AM
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General Atlantic pays up to exit controversial €300m Greensill loan - Financial Times
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