U.K. lender Greensil Capital (founded by Lex Greensil), from whom Justice’s coal supplier business, Bluestone Resources, borrowed the nearly $1 billion, went under a few months ago and finally filed for bankruptcy this past April.
At that time, it came to light that the majority of Justice’s debt had been sold off to the Credit Suisse Group, about $700 million. Justice still owes Credit Suisse this money. And while Justice and his Bluestone Resources have attempted to feign various levels of ignorance about the risk they accepted, as Bloomberg reports, the deal seems to have been something of a maybe-legal, maybe-illegal confidence game that the Justices were given a lot of information about before signing the dotted lines.
Bluestone borrowed $70 million from Greensill Capital based on invoices, but it also took out $780 million in credit for sales that hadn’t yet been made. Greensill himself made a trip to West Virginia in 2019 to work out the arrangement, the suit says, and Jay Justice traveled to Hartley-Urquhart’s home on Long Island, N.Y., to discuss the scope of the business.
The agreement between Greensill Capital and Bluestone included a list of predicted sales to various entities, some of which weren’t yet—and might never be—customers. According to the lawsuit, Greensill Capital provided Bluestone with a roster of companies that might be interested in its metallurgical coal, used to fuel blast furnaces at steel mills. The list had a presumed amount each customer could theoretically purchase, the credit Bluestone would receive for that supposed buyer, and when the mining company would have to make good on the debt.
From there, things got dubious with Greensil rolling over loan payoffs from Bluestone for a fee of the interest. Unfortunately, the pandemic hit, and every industry around the world got exposed at its pressure points. A house built out of magic cards wasn’t able to withstand the pressure. So when Greensil’s backing did not renew, Greensil began scrambling. He discovered pretty quickly that money they were projecting to come in (and keep coming in at higher profits) wasn’t there from the Justices and other borrowers. Overextended, which is a nice way of saying made a bad bet, Greensil folded in scandal. Credit Suisse now has $700 million the Justices’ owe. The other $150 million seems to “creditors of Greensill’s defunct banking unit in Bremen, Germany.”
Last week, the Wall Street Journal reported that Gov. Justice had “offered a $300 million payment and half the value of his family coal businesses to settle loans from the now-defunct Greensil Capital,” as a part of the ongoing deliberations between the Justices and Credit Suisse. According to the WSJ, that $300 million would be found “by refinancing a chunk of the existing loans with a third-party lender.” Who that third party might be was unknown.
It isn’t clear how much Bluestone would be worth in a sale. Mr. Justice sold the company in 2009 to Russian metals and mining company Mechel in a cash-and-stock deal worth more than $400 million. Mechel also assumed around $132 million in net debt, according to an announcement at the time.
Justice bought the company back for a little money in 2015. Sort of makes you wonder what exactly makes a billionaire a billionaire?
All of this comes when Kentucky regulators ask that Justice, his coal companies, and his son Jay pay out the $3 million-plus they owe for reclamation violations and the interest on those environmental penalties. According to the Lexington Herald-Leader, the penalties go back to 2015. The state says the Justices went into a deal with the Bluegrass state to clean up the areas and resolves non-compliance issues when they bought a bankrupt coal company in Eastern Kentucky. After Justice didn’t do this, the state sued him, leading to a deal where:
Jim and Jay Justice are personally liable for the payment, though the deal included a provision that if the Justices maintained a certain level of payroll at Kentucky mines, they would get back the $2.9 million.
The deal called for Justice companies to have gross payroll of at least $40 million between July 1, 2019 and Dec. 31, 2021. It allowed them to get back a portion of the $2.9 million if the total payroll was less.
These guys and their liability for payments. Of course. After renegotiating the deal they failed to live up to in 2014, and the new one in 2019, the Justices reportedly offered to give the fine money back but only as a payment for the reclamation they have not yet accomplished. Pretty amazing, right? That’s how you become a billionaire.
In March, because of too much great businessmanning, Forbes reported that Justice was no longer considered a billionaire. Thoughts and prayers and all of that.
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