West Virginia Gov.
is personally on the hook for nearly $700 million in loans his coal companies took out from now-defunct Greensill Capital, according to people familiar with the loans and documents described to The Wall Street Journal.
Mr. Justice’s personal guarantee of the loans, which hasn’t been reported, puts financial pressure on the popular Republican governor. He is also dealing with unrelated lawsuits alleging parts of his sprawling network of coal companies breached payment contracts or failed to deliver coal.
Greensill packaged the loans and sold them to investment funds managed by
Credit Suisse Group AG
and Greensill ran $10 billion in supply-chain finance funds that extended financing to a range of borrowers.
The Swiss bank froze the investment funds in March and is in talks with Mr. Justice’s Bluestone Resources Inc. and other borrowers to recoup money to make investors whole, according to the people familiar with the discussions.
is under pressure to recover money quickly and has named Bluestone as one of three large borrowers from the Greensill funds that it has identified in its recovery efforts.
Bluestone hadn’t expected to begin repaying the Greensill loans until 2023 at the earliest, it said in a lawsuit brought in March in a New York federal court alleging Greensill committed fraud in its lending practices.
Bluestone’s general counsel and an outside lawyer representing Bluestone didn’t respond to requests for comment. Requests for comment from Mr. Justice’s spokesman weren’t returned.
Greensill was a once-hot private finance firm whose bankers said could have been worth $40 billion in a potential initial public offering. It attracted investment from
SoftBank Group Corp.
before collapsing into bankruptcy in March when it lost a key type of insurance that backed up its loans.
Greensill specialized in supply-chain finance, a type of cash advance that helps companies manage cash flow.
Its unraveling sowed financial damage far from its U.K. headquarters, leading to the collapse of banks in Germany and Italy. It dealt a black eye to Credit Suisse, which sold Greensill assets to investors as relatively safe, and it imperiled the finances of British-Indian steel magnate
The Bluestone companies were one of Greensill’s largest clients, the Journal reported earlier.
Credit Suisse in a recent notice to investors said Bluestone owes nearly $700 million in loans.
Mr. Justice’s companies own several coal-related businesses, and have settled a number of cases in recent years for alleged nonpayment of bills, according to court records published by the investigative journalism website ProPublica.
The guarantees were provided by Mr. Justice as well as his wife and covered unlimited amounts, some of the people familiar with the loans said. Mr. Justice’s son and Bluestone’s chief executive, James C. Justice III, guaranteed the loans up to a certain limit, one of the people said, though that figure couldn’t be learned. All three are listed as plaintiffs in the lawsuit against Greensill.
Borrowers make personal guarantees on business loans to give lenders additional comfort in the case of default.
Forbes this year dropped Mr. Justice from its billionaires list, owing to Greensill’s failure. It now pegs his net worth at $450 million, down from $1.2 billion in April 2020. His wealth stems from dozens of coal companies, farms and other businesses he and his family oversee, including the famed Greenbrier resort in White Sulphur Springs, W.Va.
Mr. Justice was elected in 2016 as a Democrat. He switched to the Republican party in 2017 and is an avid supporter of former President
Seen by supporters as a man of the people despite his wealth and political power, he still coaches the girls’ basketball team at Greenbrier East High School.
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West Virginia voters haven’t been deterred by reports about his companies’ financial entanglements, re-electing him in 2020 with 65% of the vote. His approval rating stands at 62%, according to intelligence company Morning Consult.
“The governor’s business interests don’t carry a lot of weight in this state, there’s just not a lot of concern,” said Marybeth Beller, associate professor of political science at Marshall University. “The former president had all kinds of business problems and it just didn’t seem to matter that much to West Virginians. Jim Justice follows suit.”
Bluestone and Greensill began their relationship in May 2018, when Greensill Vice Chairman
got in touch through a mutual business associate, according to the Bluestone lawsuit.
The Bluestone companies received financing over a three-year period. When the first set of loans matured, Greensill replaced them with new loans in a process that became known as a “cashless roll,” according to the Bluestone lawsuit.
Many of the loans were backed by “prospective receivables” that hadn’t yet been generated, from a list of “prospective buyers,” some of whom might not have ever become Bluestone customers, the lawsuit says. It couldn’t be learned exactly how Bluestone used the proceeds of the loans.
Mr. Justice’s companies play a sizable role in the market for coal used in steelmaking. They mined more than 1 million tons of coal in 2018, primarily metallurgical, according to S&P Global Market Intelligence. The largest metallurgical coal miner in the U.S. produced 12 million tons in 2019.
Metallurgical coal prices dropped sharply last year but have recently rebounded to pre-pandemic levels as economies reopen.
Bluestone has a separate financial dispute with Caroleng Investments Ltd., a British Virgin Islands-incorporated company. Earlier this month, a federal judge in Delaware ordered Bluestone to post a $10 million security bond in relation to its 2015 purchase of coal assets from Caroleng. In January, Bluestone’s general counsel told the court that an earlier arbitration ruling in Caroleng’s favor would result in a hardship, according to a court filing.
In another case, a federal judge in Delaware in March found that a Justice company failed to deliver nearly 700,000 tons of coal to a Pennsylvania exporter between 2017 and 2018. He ordered the company and Mr. Justice to pay the exporter $6.8 million. Mr. Justice had personally guaranteed the coal deliveries.
Mr. Justice and the company have sought to pause the enforcement of the judgment.
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