Rating action

Scope Ratings GmbH (“Scope Ratings”) has today downgraded the issuer rating of Greensill Bank AG to B- from BBB+ and the short-term debt rating to S-4 from S-2. The Outlook remains Negative. Scope has subsequently withdrawn all ratings.  

Rating rationale

The downgrade reflects the severe deterioration of Greensill Bank’s operating model after a worsening of the financial condition of its parent company, Greensill Capital pty. Several third party-managed supply chain funds containing assets originated and structured by Greensill Capital were suspended on 1^st and 2^nd of March 2021.

The business model of Greensil Bank primarily relied on being an integral part of the Greensill Group. The resulting loss of the bank’s access to global origination and structuring capability has significantly narrowed Greensill Bank’s business model going forward, which is the main driver of the downgrade.

The bank’s loan book consists of factoring and reverse factoring obligations that are entirely covered by credit insurance, leaving the bank with limited exposure to credit risk. The ratings action also reflects that an important part of Greensill Capital’s insurance cover was not renewed, exposing Greensill Bank to significant seller concentration risk and further uncertainty over the availability of insurance cover for the bank’s receivables.

The bank has historically benefited from high capitalisation and liquidity, which was a significant support to the rating. However, the BaFin’s reported findings related to a special forensic audit of Greensill Bank’s assets and a subsequent moratorium placed on the bank on 3 March 2021 challenges the level of reliability regarding the bank’s financial information. Scope considers that the type of intervention recently ordered by BaFin is meant to protect the liquidity of the bank and may prevent further deterioration towards a potential insolvency.  

Scope considers it does not have sufficient or adequate information from reliable sources to allow the ratings to be maintained. The withdrawal of the ratings is supported by a lack of sufficient and independently verified information.

Overview of the rating construct

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed.

Methodology
The methodology used for this credit rating(s) and/or rating outlook(s) (Scope Ratings Bank Methodology, 26 January 2021) is available on https://www.scoperatings.com/#!methodology/list.
Information on the meaning of each rating category, including definitions of default and recoveries can be viewed in the “Rating Definitions - Credit Ratings and Ancillary Services” published on https://www.scoperatings.com/#!governance-and-policies/rating-scale. Historical default rates of the entities rated by Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA. Please also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and rating notations can be found at https://www.scoperatings.com/#governance-and-policies/rating-scale. Guidance and information on how Environmental, Social or Governance factors (ESG factor) are incorporated into the rating can be found in the respective sections of the methodologies or guidance documents provided on https://www.scoperatings.com/#!methodology/list.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The rated entity and/or its agents participated in the rating process.
The following substantially material sources of information were used to prepare the credit rating: public domain, the rated entity and Scope Ratings internal sources.
Scope Ratings had sufficient information from public sources and the rated entity to determine the downgrade of the ratings. Scope Ratings considers reliable and accurate the specific public information used. However, Scope Ratings believes that the quality of information provided by the rated entity is neither sufficient nor of satisfactory quality. Based on recent public information, Scope Ratings considers that the lack of sufficient and independently verified information, including from the Issuer, impose a withdrawal of the ratings. Scope Ratings, however, does not independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the credit rating action, the rated entity was given the opportunity to review the credit rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the credit rating was not amended before being issued.

Regulatory disclosures
This credit rating and/or rating outlook is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The credit rating and/or outlook is UK endorsed.
Lead analyst Dierk Brandenburg, Managing Director
Person responsible for approval of the credit rating: Pauline Lambert, Executive Director
The credit ratings/outlooks were first released by Scope Ratings on 19 July 2019. The credit ratings/outlooks were last updated on 17 September 2020.

Potential conflicts
Scope has provided ancillary and other services to the rated entity. Please see www.scoperatings.com under Governance & Policies/EU Regulation/Disclosures for a list of potential conflicts of interest related to the issuance of credit ratings.

Conditions of use / exclusion of liability
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