Six of the seven loans Greensill Capital granted to Sanjeev Gupta’s business empire were granted on the same day, new documents show.
The six loans could cost the taxpayer up to £ 240million and were of such concern to officials that they suspended all government-backed loans from Greensill days later.
During the Covid-19 pandemic, the government has said it will support loans to large businesses under the Coronavirus Large Business Interruption Loan Program (CLBILS).
Accredited lenders, including Greensill, have been authorized to grant loans of up to £ 50million to businesses.
But without special permission, they were prohibited from giving more than £ 50million to a group of companies by lending to different subsidiaries.
This was made clear to Greensill in May when the British Business Bank explained – using another steel company as an example – that: “British Steel would be a group with a limit of £ 50million, and it is not. a facility limit of £ 50 million. by subsidiary ”.
Greensill even requested that this limit be lifted, but was refused.
Yet all of the companies Greensill loaned to but one were part of the GFG Alliance, which includes Liberty Steel.
GFG is an unusual collection in that the companies are related in their ownership by Mr. Gupta and his family, but they are not formally part of a group.
In total, the GFG companies have received £ 350million in seven CLBILS loans from Greensill.
It represents all but one of the CLBILS loans that Greensill has paid.
Greensill’s latest loan went to a company whose director worked at the GFG companies.
Now, a report from the National Audit Office (NAO) shows that all but one of these seven loans to GFG were made on September 30.
Two days later, this raised the flags at the British Business Bank, which oversaw the project.
By October 13, officials had reduced the amount Greensill could lend under the program to zero.
Officials feared that by making several loans to GFG Alliance companies, Greensill could potentially break the rules of the loan program.
Greensill has denied any wrongdoing.
But in a meeting with bank officials on October 13, Greensill said “he had received ‘political guidance’ that his support for the steel industry was welcome,” the report read. NAO.
The British Business Bank acknowledges, as the report does, that in Greensill’s case, the application of a less streamlined process could have led the bank to question Greensill’s candidacy
The bank told the NAO that the Department of Business, Energy and Industrial Strategy had shown “unusual” interest in getting Greensill accredited.
In an email dated 9 June 2020, a BEIS official said that “unfortunately the Spads are pushing back and want information on when Greensill will be accredited to offer loans of up to £ 200million”.
The spads are special advisers appointed by ministers whose role is political.
Exceptionally, all of Greensill’s CLBILS loans corresponded to the maximum allowed under the program.
Although banks can provide loans of up to £ 50million that would be backed by the government, most have not.
In fact, only 17 of the 698 CLBILS loans were at the maximum amount – eight of them were from Greensill.
The remaining nine loans that reached the maximum were issued by five different lenders. The average loan amount for CLBILS was £ 3 million.
The report also revealed that Greensill had applied for a £ 500million loan from the government agency UK Export Finance.
UKEF rejected the request, concerned about press reports about Greensill and whether the proposal met its objectives.
In recent months, it has been revealed that David Cameron, who worked for Greensill, sent dozens of texts to ministers and officials in the early days of the pandemic.
He was pushing for Greensill to have access to a separate loan program backed by the Bank of England.
The audit office said if the British Business Bank hadn’t been in such a rush to get money through the door during the pandemic, it might have taken the time to question Greensill’s claims before accrediting the lender.
These claims include those on “default rates; exposure to specific borrowers and product types; and its business model and ethical standards. Each was the subject of press articles prior to accreditation, ”said the NAO.
He gave the bank credit for identifying potential breaches soon after the loans were granted.
British Business Bank Managing Director Catherine Lewis La Torre said: “The British Business Bank recognizes, as the report does, that in Greensill’s case, applying a less streamlined process could have led to the bank to question Greensill’s candidacy.
“A less streamlined accreditation process, however, would have taken longer, meaning that fewer lenders could have been accredited and fewer businesses would have received the essential funding they needed.”