News GFG on board as joint major sponsor

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Steve Dore

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Janus

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"But the solidarity has ruptured with Mr Gupta’s GFG Alliance cutting off payments to Greensill Capital as he believed the end was coming for the Greensill business.

On Friday afternoon, Greensill was still trying to negotiate a rescue deal with New York’s Apollo Global Management that would hand its best assets and operations to the US private equity group, leaving behind the rest - including any assets linked to GFG - to fall into insolvency protection in Australia and Britain.

In a sign of how concerned Greensill was as its business unravelled, it lodged documents with UK regulators on Monday taking security over shares of GFG Alliance companies Liberty Holdings Australia (the parent company of Liberty Steel) and Liberty Onesteel UK.

Getting security over shares gives Greensill greater leverage to try to get money back if any of the GFG entities collapse.

“GFG Alliance has adequate funding for its current needs and its refinancing plans to broaden its capital base and obtain longer-term funding are progressing well,” he said.

GFG Alliance, which has relationships with more than 30 financial institutions, is understood to be racing to refinance more than $2 billion-plus of funds that had been previously coming from Greensill."

If you do research into Greensill's business model, they were basically a clearing house for business invoices - they would pay suppliers based on the receivables from companies like GFG and then wait for GFG to pay them with a margin added to the top for their service. Credit Suisse and other banks have basically told them that they didn't see the value in the GFG invoices (probably because the steel market is depressed at the moment thanks to COVID) and are now bailing out.

"Sanjeev Gupta’s GFG Alliance says the Whyalla steelworks and associated iron ore mining operations are back in the black after years of losses, as unions expressed concern about the potential fallout from the troubles of one of GFG’s main financiers, Greensill Capital."

To me, this isn't a story about GFG. This is a canary in the coal mine for a financial collapse across the banking system. As soon as you've got banks pulling out of securities and accepting 80c to the dollar because they have no faith in business to turn it around, it tells me that banks that were previously risk on are now switching to risk off mode.
 

RussellEbertHandball

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The reason Greensill has had his finance frozen by Credit Suisse and others, is because of risk profile.

Their risk profile had become too great and Credit Suisse's small group of insurers who insured the supply chain funds to protect investors against default, said no more. The insurers last year said they wouldnt renew their $4.6bilUSD insurance policies and they cut the insurance policy a few days ago as they grew uncomfortable with the risk of Grensill's clients, including Gupta's companies.

Greensill has business all over the world and Gupta whilst is a significant client, isnt the majority of their business type client.

The insurance policy was crucial as it made Grensill's assets appear safer to Credit Suisse's institutional investors - some are only supposed to invest in high grade bonds.

So without any insurance, Credit Suisse suspended its $10bilUSD supply chain finance funds. It wasnt all for Gupta. How much Credit Suisse might lose hasnt been reported.

Another investor in Greensill is Japanese conglomerate SoftBank's Vision Fund. They are expected to loose all of their $1.5bilUSD investment, if Greensill is sold to a private equity firm.
 

Janus

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The reason Greensill has had his finance frozen by Credit Suisse and others, is because of risk profile.

Their risk profile had become too great and Credit Suisse's small group of insurers who insured the supply chain funds to protect investors against default, said no more. The insurers last year said they wouldnt renew their $4.6bilUSD insurance policies and they cut the insurance policy a few days ago as they grew uncomfortable with the risk of Grensill's clients, including Gupta's companies.

Greensill has business all over the world and Gupta whilst is a significant client, isnt the majority of their business type client.

The insurance policy was crucial as it made Grensill's assets appear safer to Credit Suisse's institutional investors - some are only supposed to invest in high grade bonds.

So without any insurance, Credit Suisse suspended its $10bilUSD supply chain finance funds. It wasnt all for Gupta. How much Credit Suisse might lose hasnt been reported.

Another investor in Greensill is Japanese conglomerate SoftBank's Vision Fund. They are expected to loose all of their $1.5bilUSD investment, if Greensill is sold to a private equity firm.
Softbank is the same people who got hosed on WeWork. They seem to like throwing money around.
 

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GFG Alliance appears to be paying Whyalla businesses on time despite its financier’s collapse
The financial backer of Sanjeev Gupta’s GFG Alliance has collapsed – but its profitable Whyalla operation appears to be paying its bills.


GFG Alliance appears to be paying its Whyalla suppliers on time, and does not use now-failed financier Greensill Capital for supply-chain payments in South Australia, the state’s small business commissioner John Chapman says.
The Australian arm of Greensill, founded by Bundaberg-born businessman Lex Greensill, has been placed into administration after it warned overnight it was in “severe financial distress” and unable to repay a $140m loan to Credit Suisse.

Sanjeev Gupta’s GFG Alliance, which bought the Whyalla steelworks and iron ore operations out of administration in 2017 for a rumoured $700 million, is seen as most vulnerable to Greensill’s collapse, with the financier backing Gupta’s rapid global expansion in recent years.

Mr Chapman said Whyalla businesses were currently operating on a “business as usual basis”, but were keeping a close eye on what was happening with GFG and Greensill.



(If you can access it, there's a video in that link with Sanjeev being interviewed by Ticky Fullarton, where he's still talking the good talk about Whyalla's future)
 

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RussellEbertHandball

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When the GFG announcement was made, Gupta said that the sponsorship with Port is personal and that's why the branding is GFG or GFG Alliance representing the whole Gupta Family Group. It's also why he wouldn't reveal the $$$.

It's not a sponsorship by Liberty ie the steel division, or Alvance the aluminium division, or SIMEC the renewable energies and commodities division - SIMEC is made up of shipping, infrastructure, mining (including the Middleback Ranges mine sites where they mine magnetite ore used in the steel works and any excess as well as lower grade ore called hematite ore is shipped to China and Asia), energy and commodities trading division.

The InfraBuild group ie the manufacturing division of Liberty Steel Australia's vertically integrated steel manufacturing business, is doing very well and is the cash cow in Oz. It's this division that Gupta has looked at floating via an IPO. He may have to sell it off, in part or in full, to help with his cash flow. But the whole GFG wont fall over.
 

RussellEbertHandball

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On tonight's The Business, Elysee Morgan continued her reporting of the down fall of Greensill Capital and the implication for Gupta (and many others) and spoke to Financial Times journo Robert Smith who has been looking at Greensill and Gupta for a few years. "A complex international case with lots of interlocking elements." says Smith.

At the moment the full 20 minute interview is the first video on the front of the program's home page.


Edit at https://www.abc.net.au/news/program...ralian-jobs,-as-the-story-behind-the/13236074




There is shades of the subprime mortgage and the GFC in the US in the '00's and packaging up dodgy loans and selling it as high grade loans because an insurer was prepared to insure the debt for several years, but now the insurer has pulled out.

Its a bit like the Collateralized Debt Obligations (CDO) BS that happened around housing securitization of subprime loans in the US that led to the GFC.

In the movie The Big Short, they used Anthony Bourdain to explain a CDO in practical terms.

 
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GremioPower

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On tonight's The Business, Elysee Morgan continued her reporting of the down fall of Greensill Capital and the implication for Gupta (and many others) and spoke to Financial Times journo Robert Smith who has been looking at Greensill and Gupta for a few years. "A complex international case with lots of interlocking elements." says Smith.

At the moment the full 20 minute interview is the first video on the front of the program's home page.





There is shades of the subprime mortgage and the GFC in the US in the '00's and packaging up dodgy loans and selling it as high grade loans because an insurer was prepared to insure the debt for several years, but now the insurer has pulled out.

Its a bit like the Collateralized Debt Obligations (CDO) BS that happened around housing securitization of subprime loans in the US that led to the GFC.

In the movie The Big Short, they used Anthony Bourdain to explain a CDO in practical terms.

I’m not an expert on the matter, but those who are say that nothing has substantially changed since the 2008/2009 crisis. Thus, it seems to be simply a matter of time for another similar crisis.

It may not be in the housing market, but that is irrelevant. What is relevant is that, once again, there would be too much money around, a lot being put into bad investments.

Some people are strengthening their positions in markets they know — which is bad, due reduction of competition. However, that is not the worse. It would actually be good in comparison with other investments.

Risk-takers, swindlers, and naive and dumb people, they would be throwing money around into businesses whose return won’t happen. However, the stream of investments makes them look good. Those that are clever enough, they surf on the wave, profit and move on.

However, the game cannot go on forever. If the investment fails, the money disappears. It was never there, actually, but the illusion that it was can be sustained for quite a long time. Once the truth cannot remain hidden, then, there is the crash.

Some people make huge gains out of it (kudos to them!). However, a lot of people lose; the majority of those weren’t even playing. That would be the main reason why this economic policy (pushed by the main Central banks worldwide) should stop.

If I am talking nonsense, please, feel free to correct me.

Thank you.
 

RussellEbertHandball

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I’m not an expert on the matter, but those who are say that nothing has substantially changed since the 2008/2009 crisis. Thus, it seems to be simply a matter of time for another similar crisis.

It may not be in the housing market, but that is irrelevant. What is relevant is that, once again, there would be too much money around, a lot being put into bad investments.

Some people are strengthening their positions in markets they know — which is bad, due reduction of competition. However, that is not the worse. It would actually be good in comparison with other investments.

Risk-takers, swindlers, and naive and dumb people, they would be throwing money around into businesses whose return won’t happen. However, the stream of investments makes them look good. Those that are clever enough, they surf on the wave, profit and move on.

However, the game cannot go on forever. If the investment fails, the money disappears. It was never there, actually, but the illusion that it was can be sustained for quite a long time. Once the truth cannot remain hidden, then, there is the crash.

Some people make huge gains out of it (kudos to them!). However, a lot of people lose; the majority of those weren’t even playing. That would be the main reason why this economic policy (pushed by the main Central banks worldwide) should stop.

If I am talking nonsense, please, feel free to correct me.

Thank you.
Basically correct, just how long is the time frame before it all crumbles, is the debating point. The rich don't lose, the banks don't lose - well most of them are protected - and its why people in the west are getting pissed off with governments and the system. Those in the developing nations don't have the illusion of fairness, it was taken away from them decades ago. The few are protect, some collapse is allowed to happen, and the vast majority pay for it one way or the other.
 

GremioPower

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Basically correct, just how long is the time frame before it all crumbles, is the debating point. The rich don't lose, the banks don't lose - well most of them are protected - and its why people in the west are getting pissed off with governments and the system. Those in the developing nations don't have the illusion of fairness, it was taken away from them decades ago. The few are protect, some collapse is allowed to happen, and the vast majority pay for it one way or the other.
"Collapses," broadly understood, are part of life. The economic realm (i.e., the market) is no exception. Sh*t happens. That's one thing. What has been going on is another thing; completely different.

The difference is that we have been manufacturing collapses. It is because of their manufactured nature that, when those collapses happen, they have Biblical proportions. This kind of collapse isn't natural. They are absolutely unnecessary and avoidable.

Still, it seems that we are too into it to back off. We keep doubling down the bet every time.
 

GremioPower

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In the movie The Big Short, they used Anthony Bourdain to explain a CDO in practical terms.

On the video, if the analogy between the fish stew and the CDO were perfect, there would be no issue. Kitchen-wise, there's no irony in what he is saying. A responsible, "crafty and morally onerous" chef should do precisely that: an edible dish out of consumable-but-not-tasty food. That's fine.

The analogy would be better if he were using rotten fish in the recipe. Then, it is no longer something a "crafty and morally onerous chef" would do, but what a criminal and/or a sociopath would do. That's something else entirely.
 

Janus

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On tonight's The Business, Elysee Morgan continued her reporting of the down fall of Greensill Capital and the implication for Gupta (and many others) and spoke to Financial Times journo Robert Smith who has been looking at Greensill and Gupta for a few years. "A complex international case with lots of interlocking elements." says Smith.

At the moment the full 20 minute interview is the first video on the front of the program's home page.





There is shades of the subprime mortgage and the GFC in the US in the '00's and packaging up dodgy loans and selling it as high grade loans because an insurer was prepared to insure the debt for several years, but now the insurer has pulled out.

Its a bit like the Collateralized Debt Obligations (CDO) BS that happened around housing securitization of subprime loans in the US that led to the GFC.

In the movie The Big Short, they used Anthony Bourdain to explain a CDO in practical terms.

CDOs only became a problem because interest rates were raised 17 times, which is why people started defaulting on loans.


The Federal Reserve learnt their lesson from the GFC and front runs every single situation these days. They've basically said that they inflation band control was a mistake and they don't care if it goes above 3% any more. It's why the Reserve Bank of Australia is in yield curve control at the moment - basically buying back bonds to ensure that long term yields don't raise above a certain rate.

If the RBA wasn't running yield curve control, the AUD would be up around parity with the USD because of the price of iron ore exports.

This is Modern Monetary Theory in action. Basically MMT says that if there is unemployment, it must mean that someone is hoarding wealth, so it's up to the reserve bank to dilute that wealth with more money, knowing that the real value of money is a commodity to buy goods and services. So all the people who have money sloshing around put it in the only places that can make money at the moment - either the stock market, or in China's bond market.

Of course, the Democrats in the US are stupidly just kicking the can down the road, so I'm going to give you a prediction that is iron clad - in October, 2021, the US government will shutdown until January 1st, 2022 if there is even anything close to a stimulus package attached to the US budget. If you know anything about how legislation is passed in the US, you'll know that the Senate is only allowed to pass one spending bill per year as a reconciliation bill which requires a simple majority of 51 votes. And they just used that to pass their COVID relief bill. So that means in October, when the US budget is up for debate, the Democrats need a supermajority to pass it.

So here's the prediction: September 2021 will be the last time you ever hear of COVID. It doesn't matter how many people take the vaccine. It has to be gone by October so that people don't require more stimulus in the budget that will never get the votes needed to pass. Qantas already knows that this is the deadline, which is why they are talking about resuming international flights in October. It's why Republican states like Texas and Arizona are opening up.

If COVID is still around in September 2021? I'm pulling all of my money out, cause there's gonna be a crash.
 

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