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Disclosure comes after insurer had pulled away from providing trade credit insurance

Euler Hermes, once one of Greensill Capital’s biggest credit insurers, has potential exposure to the failed supply-chain finance group through a policy covering its German bank against business fraud.

A unit of Europe’s largest insurer Allianz, Euler Hermes is one of the big three underwriters of trade credit insurance, and was a key provider to Greensill Capital until it had to pay a claim last year resulting from the default of former FTSE 100 hospital operator NMC Health.

The collapse of Greensill into administration in March has rocked the metals empire of Sanjeev Gupta, which was one of the company’s biggest borrowers. Lex Greensill, the founder of the eponymous company, told MPs last week that he had first met Gupta, whose companies are grouped together into the GFG Alliance, through an executive at Euler Hermes in around 2015.

Euler Hermes no longer has exposure to Greensill through trade credit insurance, Allianz’s group chief financial officer Giulio Terzariol said at its first-quarter results last week. But it did provide some so-called fidelity insurance, Terzariol said, adding that it had not “come into play”.

The Euler Hermes policy covers Greensill Bank, according to a person familiar with the matter.

Fidelity, or business fraud, insurance covers a company against financial losses caused by “intentional unauthorised actions” of trusted third parties. That includes the company’s employees, from the board of directors down, according to the insurer’s marketing material. 

In March, Germany’s financial regulator, BaFin, filed a criminal complaint against Greensill Bank’s management for suspected balance sheet manipulation, after a forensic audit by consultancy KPMG. The bank failed “to provide evidence of the existence of receivables in its balance sheet that it had purchased from the GFG Alliance Group”, BaFin said.

Euler Hermes declined to comment, including on the size of the policy. Greensill Bank’s administrator Michael Frege, a partner at law firm CMS Hasche Sigle, declined to comment.

Bremen criminal prosecutors told the Financial Times that five former executives of Greensill Bank are under criminal investigation, and that their houses have recently been searched.

Greensill told MPs last week that there had been no criminal charges laid against staff of Greensill Bank. Under the German criminal code, potential suspects are only formally charged at the end of an investigation if public prosecutors file an indictment to a judge — this often happens months, if not years, after a probe begins.

On Friday, the UK’s Serious Fraud Office launched an investigation into suspected fraud at GFG including its financing arrangements with Greensill Capital. GFG has denied wrongdoing said it would “co-operate fully” with the probe.

The NMC-related claim paid by Euler Hermes last year was referred to by Greensill and the company’s adviser, former UK prime minister David Cameron, in their appearances before MPs last week. They gave it as an example of insurance working properly to protect investors from losses.

But insurance experts have told the FT that the string of client defaults suffered by Greensill last year, and the loss of Euler Hermes, were key moments in the lender losing support of the trade credit insurance market.

In April last year, Euler had the third largest exposure to Credit Suisse’s biggest supply chain finance fund, which packaged Greensill’s loans into investments, behind Insurance Australia and Japan’s Tokio Marine, according to a document seen by the FT. At that point, Euler underwrote 12 per cent of the credit risk in the $5bn fund.

The other two of the big three trade credit underwriters, Coface and Atradius, never insured Greensill, according to people familiar with the matter. Greensill’s business model ultimately collapsed after it failed to replace Tokio Marine, which told Greensill in September 2020 that it would not renew its cover.

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Deal would value manufacturing-software company at about $1.6 billion

Bright Machines is nearing a merger with a special-purpose acquisition company to go public in a deal that would value the manufacturing-automation business at about $1.6 billion, according to people familiar with the matter.

The creator of a platform that uses artificial intelligence and robotics to automate tasks in electronics manufacturing, Bright Machines is close to a deal with SCVX Corp. SCVX 0.61% , the people said. The merger could be announced as soon as this week.

Founded in 2018, Bright Machines says that its “microfactories” can be programmed to complete electronics-manufacturing tasks and continue improving as they repeat them. They make supply chains more efficient, removing the need for as many human workers and saving resources in many technology-dependent industries, the company says.

The San Francisco-based company currently has about 25 customers, according to its website. Its existing investors include BMW iVentures—the venture-capital arm of auto maker BMW AG—Eclipse Ventures and Lux Capital.

If the deal is completed, Bright Machines would be expected to generate about $435 million in cash proceeds from the roughly $230 million held by the SPAC and $205 million from a private investment in public equity, or PIPE, associated with the merger, the people said. SoftBank Group Corp. and Fidelity Investments are expected to participate in the PIPE.

The company would become the latest aiming to modernize manufacturing with technology to go public by merging with a SPAC. Several 3D-printing companies, including Velo3D and Desktop Metal, have reached such deals in recent months.

Also called blank-check companies, SPACs like SCVX are shell companies that list on an exchange to acquire a private business and take it public. Merging with a SPAC has become a common way for startups to raise large sums and go public. One reason is that SPAC mergers let startups make projections about their business, which aren’t allowed in a normal IPO.

Shares of companies that have gone public through SPACs have tumbled lately amid concerns about tighter regulations and frothy valuations.

Even SPACs that have unveiled deals in recent weeks have seen their share prices struggle, a trend that can make completing mergers more challenging because blank-check company investors have the option to withdraw their investment before deals get done. If the SPAC’s shares are low enough, that withdrawal can net investors a small risk-free profit. A high rate of withdrawals can then cause deals to be renegotiated and valuations to change.

SCVX raised $230 million from investors in January 2020. The company’s chief executive is Michael Doniger, a former portfolio manager at the hedge fund Citadel.

Some Microsoft directors began an investigation in 2019 into woman’s allegations of prior sexual relationship with Bill Gates; Mr. Gates’s spokeswoman says decision to leave board in 2020 wasn’t related to the matter

Microsoft Corp. board members decided that Bill Gates needed to step down from its board in 2020 as they pursued an investigation into the billionaire’s prior romantic relationship with a female Microsoft employee that was deemed inappropriate, people familiar with the matter said.

Members of the board tasked with the matter hired a law firm to conduct an investigation in late 2019 after a Microsoft engineer alleged in a letter that she had a sexual relationship over years with Mr. Gates, the people said.

During the probe, some board members decided it was no longer suitable for Mr. Gates to sit as a director at the software company he started and led for decades, the people said. Mr. Gates resigned before the board’s investigation was completed and before the full board could make a formal decision on the matter, another person familiar with the matter said.

“Microsoft received a concern in the latter half of 2019 that Bill Gates sought to initiate an intimate relationship with a company employee in the year 2000,” a Microsoft spokesman said. “A committee of the Board reviewed the concern, aided by an outside law firm to conduct a thorough investigation. Throughout the investigation, Microsoft provided extensive support to the employee who raised the concern.”

A spokeswoman for Mr. Gates said, “There was an affair almost 20 years ago which ended amicably.” She said his “decision to transition off the board was in no way related to this matter. In fact, he had expressed an interest in spending more time on his philanthropy starting several years earlier.”

Mr. Gates resigned from the Microsoft board on March 13, 2020, three months after he had been re-elected to his seat. In a press release filed with regulators and a post on LinkedIn, the billionaire said then he wanted to focus on his philanthropy and would continue to serve as a technical adviser to Chief Executive Satya Nadella. That same day, he also vacated his board seat at Berkshire Hathaway Inc., the conglomerate run by Mr. Gates’s friend Warren Buffett.

Mr. Gates, 65 years old, and his wife Melinda French Gates, 56, announced earlier this month that they were ending their marriage after 27 years. In a joint statement posted on Twitter, the couple said, “We no longer believe we can grow together as a couple in this next phase of our lives.” In a divorce petition, Ms. French Gates said their marriage was “irretrievably broken.”

Ms. French Gates had been working with lawyers at several firms since at least 2019 to unwind the marriage, The Wall Street Journal reported last week. The couple hasn’t said what prompted the split. One source of concern for Ms. French Gates was her husband’s dealings with convicted sex offender Jeffrey Epstein, the Journal reported. A spokeswoman for Mr. Gates said in 2019 that he met with Mr. Epstein for philanthropic reasons and regretted doing so.

Mr. Gates was Microsoft’s chief executive until 2000, chief software architect until 2006 and chairman until 2014. In recent years, Mr. Gates continued to serve on the board and as a technical adviser to Mr. Nadella even as he shifted his focus to his philanthropy, the Bill & Melinda Gates Foundation. He continues to serve as a technical adviser to Mr. Nadella.

In April 2019, Microsoft said it would change its process for handling employee complaints of harassment and discrimination. The company also said at the time it would add additional training and boost the number of human resources staff who address complaints, among other changes.

Mr. Nadella announced the changes after women at Microsoft shared stories of sexual harassment and discrimination in an email chain within the company, the Microsoft spokesman confirmed. Quartz originally reported the email chain in 2019.

Members of the Microsoft board became aware in late 2019 of the letter from the female engineer, who demanded changes to her Microsoft job and also shared details of her relationship with Mr. Gates, the people familiar with the matter said. Mr. Nadella and other senior executives were aware of the woman’s allegations, some of the people said.

Some board members asked about Mr. Gates’s dealings with Mr. Epstein, one of the people said. Board members were told the relationship was focused on philanthropy and nothing more, this person said.

In December 2019—before the end of the probe—Mr. Gates was re-elected to Microsoft’s board at the annual shareholder meeting. As more became clear about the matter, board members were concerned Mr. Gates’s relationship with the woman had been inappropriate and they didn’t want a director associated with this situation in the wake of the #MeToo movement, the people said.

As part of her discussions with Microsoft, the employee asked that Ms. French Gates read her letter, people familiar with the matter said. It couldn’t be learned whether Ms. French Gates read the letter.

A Harvard dropout, Mr. Gates started Microsoft in 1975 with childhood friend Paul Allen and built it into one of the world’s biggest companies, making the pair two of the planet’s richest people. Mr. Gates married Melinda French, then a Microsoft employee, in January 1994.

Mr. Gates and his rival Steve Jobs, who died in 2011, became the faces most closely associated with the rise of personal computers. Microsoft and Apple Inc. now rank as the two of the largest public companies, with a market value of more than $1.8 trillion and $2.1 trillion, respectively.

“Microsoft will always be an important part of my life’s work and I will continue to be engaged with Satya and the technical leadership to help shape the vision and achieve the company’s ambitious goals,” Mr. Gates wrote in the March 2020 LinkedIn post announcing his departure from the board.

By 2020, the Gateses were already in discussions to divide their vast wealth and legal teams from both sides were privately in discussions with a mediator to work out a separation, the Journal previously reported.

The May 3 divorce filing says the couple had agreed to a separation contract to divide their assets—a fortune estimated at $130 billion by Forbes. The Gateses have said they would give away most of their wealth and have donated more than $36 billion to the Gates Foundation over the years. The couple said they planned to remain co-chairs at the foundation and jointly lead it after their divorce.