Sanjeev Gupta’s bank faces potential losses over failed commodities trader - Financial Times

Sanjeev Gupta’s bank faces potential losses over failed commodities trader – Financial Times

A bank owned by British industrialist Sanjeev Gupta faces tens of millions of pounds in potential losses, after providing more than $100m of funding to a Dubai-based rice trader that recently collapsed.

Wyelands Bank, which began offering attractive deposit rates to UK savers in 2017, supplied financing to agricultural commodities specialist Phoenix Commodities, according to four people familiar with the matter and documents seen by the Financial Times.

The Dubai-based company collapsed in April after racking up $450m of losses on currency hedges it blamed on a rogue trader.

While the British bank’s exposure is to the trading firm’s customers rather than Phoenix itself, it is facing potential losses because it is struggling to collect payment on invoices from companies based in the Middle East and Indian subcontinent, according to several people familiar with the matter.

Wyelands has in the past month engaged the services of UK law firm Norton Rose to chase down bills it says some of these customers owe the bank, the people said.

An FT investigation earlier this year revealed that Wyelands came under scrutiny from the UK banking regulator for financing Mr Gupta’s GFG Alliance business empire through a network of shell companies.

Mr Gupta has previously said lending by Wyelands would be used to help promote a revival of British industry by supporting small and medium-sized businesses.

Wyelands said it was unable to comment on the Phoenix case because its “interactions with clients and regulators are confidential”.

The challenger bank’s latest accounts for the year ending April 2019 show that £75m of its £434m of loans and advances to customers were to clients in the Middle East and north Africa.

Phoenix claimed to employ 2,500 people before it collapsed, 10 times the size of the standard definition of an SME, which Wyelands said it would primarily serve.

The commodities trading house became a client of Wyelands after an introduction from Mr Gupta, according to three people familiar with the matter, who had previously done business with Phoenix’s founding shareholder Gaurav Dhawan.

Mr Gupta’s GFG Alliance declined to comment.

India-born Mr Gupta started out as a commodities trader while still a student in Cambridge and previously lived in Dubai. He moved back to the UK where he began a string of acquisitions of struggling metals factories more than half a decade ago, building up a privately owned conglomerate with $20bn in revenue and 35,000 employees.

Wyelands is named after the Welsh country estate the metals magnate owns with his wife. Formerly known as Tungsten Bank, it was acquired by Mr Gupta in 2016 and is ultimately held through a family trust in the Channel Islands.

The businessman earlier this year decided to wind down Commonwealth Trade Bank, a separate UK lender he owned that focused on lending to the commodities industry, returning its wholesale banking licence to regulators.

Wyelands agreed to take on that lender’s assets as part of the arrangement. The bank declined to comment on whether it would take on more Phoenix-related loans as a result.

Creditors such as UK bank HSBC and the hedge fund Chenavari are owed more than $1.2bn by Phoenix, which is going through liquidation and insolvency proceedings in Dubai, Singapore and the British Virgin Islands, where its parent holding company is based.

Liquidators and creditors lost contact with Mr Dhawan weeks after the trading firm collapsed. Several creditors believe Mr Dhawan is now in India, despite the 45-year-old Dubai resident not having lived in the Asian country for years. Public records show that the India-born businessman gained Maltese citizenship in 2018.

Mr Dhawan could not be reached for comment.

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