The remnants of Greensill Capital, the UK financing company that collapsed earlier this year, filed for bankruptcy in the US, aiming to halt litigation filed by one of its biggest clients, a coal-mining company owned by the governor of West Virginia.
Greensill’s US bankruptcy filing on Wednesday seeks to halt a lawsuit brought earlier this year by coal supplier Bluestone Resources and its owners, West Virginia Governor Jim Justice and his family, according to court papers filed in the US Bankruptcy Court in New York.
A lawyer representing Bluestone in the litigation against Greensill didn’t immediately respond to a request for comment.
In addition to Greensill itself, the lawsuit also named its founder, Lex Greensill. The defendants haven’t formally answered the complaint, filed in New York federal court.
Greensill’s administrators said Wednesday they hope to have a bankruptcy judge hear the petition for bankruptcy protection before a 13 September deadline to respond to Bluestone’s complaint. Typically, US bankruptcy courts must agree to take up a foreign insolvency before companies can receive the benefits of bankruptcy, such as halting litigation.
The bankruptcy filing would also protect Greensill’s US assets while its UK administrators “continue to manage the affairs, business and property of the company,” they said on 18 August.
Greensill collapsed after it lost credit insurance critical to the complex business of providing supply-chain financing, a form of short-term corporate lending to its clients. Greensill made supply-chain loans to companies such as Bluestone, then packaged them up into notes that were sold to investors.
Bluestone and the Justice family sought unspecified damages from Greensill in their lawsuit, which alleged “a continuous and profitable fraud” carried out “under the guise of establishing a long-term financing arrangement with Bluestone.”
Governor Justice, a Republican, has seen his family businesses thrown into turmoil over Greensill’s collapse, which left him on the hook for $850m his companies borrowed. Greensill sold a majority of Bluestone’s loans to investment funds managed by Credit Suisse. Bluestone is in talks to restructure the debt.
Greensill was tipped into insolvency when Credit Suisse froze $10bn in investment funds that Greensill relied upon to fuel much of its business.
Write to Soma Biswas at [email protected]
This article was published by Dow Jones Newswires