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The financing group Greensill Capital, supported by the Japanese group SoftBank and the US group General Atlantic, has provided a misrepresentation to market players regarding the bonds issued in 2017 on behalf of commodity mogul Sanjeev Gupta.
The May 2018 statement to bond market investors and brokers indicated that the Scottish Government had approved a guarantee for a Kinlochleven hydroelectric power plant owned by Gupta's GFG Alliance against which the bonds were guaranteed.
But Scotland said no approval had been given, according to a government statement provided to Reuters. The meeting minutes of the committee to approve such a guarantee, available on the committee's website, do not refer to a 2018 GFG guarantee.
Although the Scottish Government provided a guarantee in 2016 for an aluminum plant owned by Gupta's GFG, "no other guarantee was offered to the GFG Alliance by a Scottish minister or official," said a spokesman. Floor-.
The prospect of government support was one of the main reasons why Swiss badet manager GAM Holding AG bought the 220 million pounds of bonds a year ago because, under the bonds, this potentially meant a short-term redemption at a higher price, according to three people familiar with the subject. A Scottish government guarantee would allow GFG to buy back the bonds earlier, according to the statements presented in a pre-sale paper of April 2017 describing the nature of the proposed transaction produced by Greensill for GAM and reviewed by Reuters.
This false statement marks the latest development of a series of GFG bonds purchased by GAM fund manager Tim Haywood, suspended and then fired as a result of an internal whistleblower alerting the authority of British control, the Financial Conduct Authority.
In response to questions from Reuters, Greensill initially refused to produce pre-sale documents relating to Kinlochleven bonds or any guarantee updates. The company recently confirmed that it has produced the April 2017 pre-sale document and the investor update of May 2018, while noting that this update "was based on information provided by GFG".
Greensill added, "Greensill never knowingly misrepresents and strongly refutes these claims. The content of any statement made is considered accurate at that time. "
GFG said it had discussed with advisers and investors the possibility of a guarantee relating to the Kinlochleven plant, but declined to comment on the information provided to Greensill.
"GFG has not misled anybody as to the nature of its discussions on additional guarantees from the Scottish Government. GFG has never informed either party that such a guarantee has been put in place and it is clear that the Scottish Government has not done so, "said GFG, the coordinating group for metals, power and minerals. bank interest of the Gupta family.
Gupta did not respond to a request for comment.
In statements made Sunday after the publication of this article, Greensill, GFG and fund manager Haywood said the May 2018 update was not false or misleading in the context of broader discussions involving the parties.
Under UK law, knowingly providing false or misleading information on regulated securities is considered a market abuse, an offense for which the UK Financial Regulator can impose heavy fines and prohibit companies or individuals from participating in regulated activities such as the conclusion of agreements on obligations. Damon Batten, management consultant at Bovill, London-based financial services regulatory consulting firm.
Regulators do not have to sue for market abuse, Batten said.
According to specialists, the degree of diligence required by the bond issuers depends on the situation and their regulatory status.
The Financial Conduct Authority, the UK market regulator, declined to comment.
SoftBank has not responded to a request for comment. The private equity group General Atlantic declined to comment.
GAM stated that he did not feel misled by Greensill.
"GAM has never been led to believe that the Scottish Government's guarantee had actually been put in place … and the note of May 2018 was not interpreted in such a way as to suggest that the guarantee was in fact place, "he said in a statement issued after the publication of this article. "GAM has never received any false or misleading information from Greensill" regarding the transaction on Kinlochleven bonds, he said.
The badet manager said: "GAM continues to value its ongoing relationship with Greensill, as evidenced by our Supply Chain Funding Pool."
GAM has sold or is reselling to GFG approximately $ 1 billion of bonds, including those of Kinlochleven, according to public statements and the three people familiar with the buybacks, who added that GAM wanted to be fully repaid.
Since GAM suspended Haywood Fund Manager and placed restrictions on its clients' withdrawals following a wave of redemption requests last summer, GAM's market capitalization has dropped by more than $ 1 billion.
GAM announced the dismissal of Haywood in February, after stating that it had not complied with due diligence procedures and that it had itself signed certain contracts when internal policies required two signatures, but that he had not specified the transactions that led to his dismissal.
A spokesman for Haywood said Friday that former GAM fund manager had denied any wrongdoing. In a statement to the media in April, Haywood said that GFG's obligations had generated the profits from the investments in the funds that he had anticipated "even though the realization was slower than what I did. ; expecting ".
BILLIONS OF DOLLARS
The Australian former bank executive, Lex Greensill, founded his finance company in 2011. In recent months, it has received an investment of $ 800 million from the SoftBank fund, which, according to a source close to the transaction, was worth around 3 , $ 5 billion. This follows a $ 250 million investment by US-based private equity firm General Atlantic in 2018.
Greensill helped GFG raise billions of dollars through the sale of bonds to fund acquisitions, according to a video on Gupta's Greensill website. This included the sale in 2017 of Kinlochleven bonds.
Haywood told his colleagues at GAM to have bought the bonds, which were to repay investors over 18, as he hoped to be able to resell them to GFG in about a year for an amount greater than what he would have paid, according to the people familiar with the question. This is because he understood from Greensill that Scotland was likely to provide a guarantee relating to the Kinlochleven plant, which, according to the terms of the obligation, would allow GFG to buy back the bonds and refinance itself with a cheaper debt, said the population.
The companies of the GFG group are not rated by any major rating agency and have high debts.
"UPDATE OF GREENSILL"
In May 2018, Greensill introduced a memo titled "Greensill Update for KLL", referring to Kinlochleven bonds, on a secure online platform accessible to bond investors and other market participants.
The update indicates that the Scottish Government had several conditions to fulfill before granting a new guarantee. He added that these conditions "have been fulfilled and that the guarantee has been approved by the Prime Minister [Nicola Sturgeon] on behalf of the Scottish Government. As a result, GFG was planning to buy back the bonds, the update continued. Sturgeon has been at the helm of the Scottish Government since 2014.
The Scottish Government has considered the possibility of providing an additional guarantee to support the extension of GFG's activities in Scotland, according to the minutes of a meeting held in August 2017 between Sturgeon and a civil servant. The minutes were part of the documents published by Scotland following a request by the Reuters Freedom of Information Act for all information until mid-2018 about Sturgeon's discussions regarding an additional guarantee. In March 2018, the most recent documents provided in response to Reuters' request, no approval had been provided.
In his statement made Sunday after the publication of this article, Greensill said that this article was "based on an incomplete and false reading of the facts". He added that the May 2018 update "was a minute of contemporary discussions." neither false nor misleading. "
In the GFG statement Sunday after the publication of this article, the company stated that "the May 2018 update written by Greensill was part of a broader and contemporary verb update … confirming the conditions in order for the Scottish Government to begin a review the guarantee had been fulfilled. "
GFG added Sunday in a statement that the update "was neither false nor misleading given the context of contemporary verbal discussions".
Haywood, in his Sunday statement, said: "Greensill, GFG or the Scottish Government has never misled me on the prospect of a possible guarantee from the Scottish Government or on its progress". The update of May 2018 transaction and contemporary discussions, "he said.
He added that the Kinlochleven bonds had been sold early in 2019. GFG said it had bought and refinanced the bonds early this year.
(Report by Tom Bergin, edited by Cbadell Bryan-Low)
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