{"id":48611,"date":"2019-09-22T17:30:29","date_gmt":"2019-09-22T22:30:29","guid":{"rendered":"https:\/\/olduvai.ca\/?p=48611"},"modified":"2019-09-22T17:31:49","modified_gmt":"2019-09-22T22:31:49","slug":"use-of-hidden-debt-loophole-spreads-among-australian-corporations","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=48611","title":{"rendered":"Use of \u201cHidden Debt Loophole\u201d Spreads Among Australian Corporations"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/wolfstreet.com\/2019\/09\/22\/hidden-debt-loophole-becomes-popular-with-australian-corporations\/\">Use of \u201cHidden Debt Loophole\u201d Spreads Among Australian Corporations <\/a><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Situation already so bad that hiding debt becomes a priority?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Australian engineering group UGL, which is working on large infrastructure projects such as Brisbane\u2019s Cross River Rail and Melbourne\u2019s Metro Trains,&nbsp;<a href=\"https:\/\/www.afr.com\/companies\/infrastructure\/cimic-s-ugl-stretches-out-bill-payments-to-65-days-20190918-p52sgy\">recently sent a letter<\/a>&nbsp;to suppliers and sub-contractors informing them that as of October 15, they will be paid 65 days after the end of the month in which their invoices are issued. The company\u2019s policy had been, until then, to settle invoices within 30 days.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The letter then mentioned that if the suppliers want to get paid sooner than the new 65-day period, they can get their money from UGL\u2019s new finance partner, Greensill Capital, one of the biggest players in the fast growing supply chain financing industry, in an arrangement known as \u201creverse factoring\u201d. But it will cost them.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Reverse factoring is a controversial financing technique that played a&nbsp;<a href=\"https:\/\/wolfstreet.com\/2018\/07\/30\/hidden-debt-loophole-could-be-widespread-fitch\/\" target=\"_blank\" rel=\"noreferrer noopener\">major role in the collapse of UK construction giant Carillion<\/a>, enabling it to conceal from investors, auditors and regulators the true magnitude of its debt.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s how it works: a company hires a financial intermediary, such as a bank or a specialist firm such as Greensill, to pay a supplier promptly (e.g. 15 days after invoicing), in return for a discount on their invoices. The company repays the intermediary at a later date. This effectively turns the company\u2019s accounts payable into debt that is owned a financial institution. But this debt is not disclosed as debt and remains hidden.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In its letter to suppliers, UGL trumpeted that the payment changes would \u201cbenefit both our businesses,\u201d though many suppliers struggled to see how. One subcontractor\u00a0<a href=\"https:\/\/www.afr.com\/companies\/infrastructure\/cimic-s-ugl-stretches-out-bill-payments-to-65-days-20190918-p52sgy\">interviewed by<\/a><em>The Australian Financial Review<\/em>complained that the changes were \u201coutrageous\u201d and put small suppliers at a huge disadvantage since they did not have the power to challenge UGL. Some subcontractors contacted by\u00a0<em>AFR\u00a0<\/em>refused to be quoted out of fear of reprisal from UGL.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Use of \u201cHidden Debt Loophole\u201d Spreads Among Australian Corporations Situation already so bad that hiding debt becomes a priority? Australian engineering group UGL, which is working on large infrastructure projects such as Brisbane\u2019s Cross River Rail and Melbourne\u2019s Metro Trains,&nbsp;recently sent a letter&nbsp;to suppliers and sub-contractors informing them that as of October 15, they will [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[41,195,27233,21031,27230,27232,4255],"class_list":["post-48611","post","type-post","status-publish","format-standard","hentry","category-economics","tag-australia","tag-debt","tag-greensill-capital","tag-hidden-debt","tag-nick-corbishley","tag-ugl","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48611","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=48611"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48611\/revisions"}],"predecessor-version":[{"id":48612,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48611\/revisions\/48612"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=48611"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=48611"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=48611"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}