Documents seen by The Sunday Times show that Liberty Steel Newport in south Wales used a circular trading scheme whereby it sold steel to a company with close links to the tycoon, which another Gupta business was then to buy back.
That £2.5 million sale allowed Liberty to borrow from Greensill via invoice discounting. Liberty was then free to sell the same steel again, this time to a different customer, and raise more cash from Greensill against that second sale.
Proving Adam Smith right once again.
New methods of lending money aren’t quite the point. The shortage is of people worth lending money to.
They might also be missing a trick here:
The documents show that Liberty Steel Newport sold £2.5 million of coils and tubes to VS International (VSI), a metals trading business with links to GFG. VSI was established in 2015 by Vikrant Sharma — who was until recently described as the president of Gupta’s Liberty Steel Holdings USA.
Liberty was then able to raise cash from Greensill, which provided finance against the invoice from VSI. Typically, Greensill lent Liberty 80 per cent of an invoice’s value, suggesting that it handed Liberty £2 million, to be repaid more than 100 days later.
Documents show that VSI would then sell that steel to Gupta’s CS Management Services, which in turn would sell the steel back to Liberty Steel Newport. That same steel was then to be sold for a second time, to a third party, with Greensill again providing cash against that invoice.
Don’t forget that Greensill did reverse factoring as well. So that sale from VSI to Gupta might also have been financed…..the reverse part means to factor invoices from suppliers, not just customers.