The Australian underwriter who provided Greensill Capital’s lifeline

The rise of Greensill Capital was fuelled by access to billions of dollars of insurance coverage provided by an easy-going underwriter, who lives in a nondescript house in a south Sydney suburb, tweets about cricket and hangs out at the local rugby league club.

Acquaintances of Greg Brereton say he is an unlikely figure to be at the centre of an international controversy. Yet court filings and interviews show the 58-year-old insurance executive had a crucial role until he was fired by his employer, The Bond & Credit Co, for allegedly breaching risk limits to Greensill, which collapsed last week.

The insurance policies that Brereton provided to Greensill were vital. As a supply chain finance group, Greensill lent money to corporate customers to pay their suppliers. These loans were packaged into funds run by Credit Suisse and sold to investors. The insurance covering the underlying credit allowed investors to treat the funds as almost risk-free.

Greensill said in a court filing that the insurance “allows Greensill to access sources and levels of funding which it would not otherwise be able to access and which are critical sources of financing for its business”.

Yet last year Tokio Marine, the Japanese insurance group that acquired BCC in 2019, said that Brereton had been fired after he insured credit to Greensill “in excess of his delegated authority”, with the total exceeding A$10bn ($7.7bn). 

Tokio Marine said that “dealings” between Brereton and Greensill were under investigation and insurance coverage would not be renewed, according to court filings. Greensill relied on a shrinking pool of insurers and failed to find an alternative when BCC pulled out.

However, three local contacts of Brereton said it was implausible that he could have amassed the Greensill exposure without the knowledge of management, saying he had been made a “patsy” for the subsequent events. 

“In Aussie speak, he’d be a ‘good bloke’,” said another long-term contact of Brereton, calling him someone “you could have a beer with” — but also an experienced underwriter with a good understanding of risk and credit. “I never considered him to be cavalier,” said a former colleague.

After a stint at insurer QBE, Brereton was picked in late 2015 as head of trade credit for the agency that would become BCC. “While Greg believes in, and is a master practitioner in strong commercial acumen and due diligence, it’s his relationship-based philosophy and approach that helps him facilitate the all-important critical financial transactions,” BCC’s website said.

This relationship-based approach was perfectly attuned to the style of Lex Greensill, who had pioneered ever more creative varieties of supply chain finance.

In the summer of 2018 Greensill had hired as an adviser David Cameron, the former UK prime minister, whose spokesman said at the time that the former Tory leader had “great admiration for Lex Greensill”.

Greensill, a charismatic Australian financier, had been awarded a CBE a year earlier for services to the economy. Cameron was granted stock options worth as much as 1 per cent of the company, according to industry figures with knowledge of the matter. With Greensill seeking to raise funds last year at a $7bn valuation, the options represented a potential windfall but are now presumed to be worthless.

Underlining the active nature of the work and reflecting the importance of insurance to Greensill, Cameron made a visit later that year to the Sydney offices of BCC to meet Brereton, according to two people familiar with the matter. The visit was first reported by The Guardian.

One person familiar with Cameron’s visit to the obscure BCC said that it bemused many in the Australian insurance industry. “David Cameron visiting that office was just comic,” he said.

Cameron has not responded to repeated requests for comment on Greensill over the past two weeks. Reached by the Financial Times on Tuesday morning, Cameron replied: “Do you want to ring my office?” When told that his office was not answering any questions he abruptly hung up the phone.

The money poured in

At an industry meeting in Europe in late 2019, members of BCC’s trade credit team said they were excited about the growth stemming from the Greensill relationship, according to one person present. Money was by then pouring into Greensill through funds offered by Credit Suisse, putting pressure on the lender to grow its lending book, and increasing its insurance needs. 

But by the summer of 2020, Tokio Marine was alarmed at the amount of exposure it had to Greensill. During its investigation, Greensill was asked for a range of documents relating to agreements entered into by Brereton, including those involving companies linked to SoftBank’s Vision Fund, a Greensill investor that was part of a circular financing scheme identified by the FT in June 2020. 

The documents also cite policies related to “Liberty Delta”, which people familiar with the matter said referred to a series of steelworks across Europe that industrialist Sanjeev Gupta bought from ArcelorMittal in 2019.

The acquisition was backed with a €2.2bn receivables financing line from Greensill, three times its purchase price. The financing firm was able to advance so much credit to Gupta because it funded hypothetical “future” invoices, orders for steel not yet placed but expected in future, a practice that later drew scrutiny from German regulator BaFin.

One person familiar with Gupta’s financing told the FT in late 2019 that Brereton was reportedly “frightened” by the amount of exposure BCC had to the industrialist’s businesses. 

In last-ditch negotiations with Greensill, Tokio Marine demanded $2.5bn in extra collateral, according to evidence Greensill provided to the English High Court last week. Greensill could not raise the money, or find adequate replacement insurance.

Tokio Marine, BCC, Greensill, Credit Suisse and GFG Alliance declined to comment. Brereton did not respond to requests for comment.