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Greensill Capital filed for insolvency on Monday after losing insurance coverage for its debt repackaging business and said in its court filing that its largest client, GFG Alliance, had started to default on its debts, Reuters reported. Greensill began to unravel last Monday when its main insurer stopped providing credit insurance on $4.1 billion of debt in portfolios it had created for clients including Swiss bank Credit Suisse. The court document supporting Greensill’s insolvency application said without that insurance, Greensill was no longer able to sell notes backed by debts to investors, nor fund clients such as GFG in return. “GFG has fallen into severe financial difficulty,” the court filing said. “GFG has started to default on its obligations.” A spokesman for GFG, which is controlled by Indian-British steel magnate Sanjeev Gupta, declined to comment on the default claim in the filing, or the size of Greensill’s exposure to GFG. Last week, GFG said it had adequate current funds and that its businesses were operationally strong. 

Waves of bankruptcies triggered by the coronavirus pandemic will wipe as much as $1 trillion from the value of global corporate debt markets, the Bank for International Settlements warned, Bloomberg News reported. Company insolvencies “are expected to rise as measures to support credit are wound back, new consumption habits and business practices accelerate the downsizing of specific sectors,” the BIS wrote in a quarterly report published on Monday. “The looming increase in corporate bankruptcies will generate credit losses that will need to be absorbed, either by the financial system or by taxpayers.” The somber outlook comes a year after the pandemic threw credit markets into a tailspin and constrained access to funding for essential expenses like payrolls and inventory. And while market valuations have broadly recovered, more pain lies ahead for weaker companies, according to the BIS, which is known as the central bank for central banks. It will be an uneven blow, meanwhile. Losses in the recreation sector, which came to a standstill as governments imposed restrictions on travel and leisure to slow the spread of the virus, are projected to increase more than 8 percentage points compared to the 2018-19 period, according to the report.

A lawyer for Frontera Holdings LLC, the owner of a natural gas plant near the U.S.-Mexico border, told a judge on Tuesday that it could face fines in Mexico after it was unable to provide electricity for several days due to the brutal winter storm that hit Texas, but that it intends to proceed with its proposed restructuring as planned, Reuters reported. Frontera attorney Matthew Fagen of Kirkland & Ellis told U.S. Bankruptcy Judge Marvin Isgur in Houston during a remote hearing that Frontera, which is the only U.S.-based natural gas operator that exports electricity exclusively to Mexico, could not provide the electricity it is required to deliver because the frigid weather “eviscerated” gas supply. Though the company does not know yet whether it will face any penalties as a result, its plan to exit bankruptcy in the spring remains intact, Fagen said.

Chinese coffee chain Luckin Coffee said yesterday that its board had found no evidence of misconduct by Chief Executive Jinyi Guo during a month-long investigation into allegations made by some employees, Reuters reported. Guo, who took over after the competitor to Starbucks ousted co-founder and chairman Charles Zhengyao amid an internal fraud investigation, had denied the allegations. The coffee chain’s explosive growth was halted last year by an investigation into its accounts for overstating 2019 revenue and understating net loss. This resulted in a penalty of $180 million to settle the fraud charges and the company seeking bankruptcy protection. The latest investigation found that some members of the company’s former management had participated in the planning of the petition letter sent to the board on Jan. 4. Luckin said that the special panel of the board reviewed more than 50,000 transaction documents, emails and other documents, and interviewed nearly 40 individuals, both external parties and staff. The investigation team included board members, outside counsels and forensic accounting experts.

Mexico’s second-largest movie theater chain, Grupo Cinemex SA, is closing its cinemas indefinitely and is working with banks to restructure at least $230 million in debt, Bloomberg News reported. Cinemex, owned by the family that controls copper miner Grupo Mexico, is closing in on a deal with banks including Banco Bilbao Vizcaya Argentaria SA, HSBC Holdings Plc, Banco Santander SA and Bank of Nova Scotia. To ease its cash burn, Cinemex decided to shut 145 cinemas outside the capital area until Hollywood resumes major film releases and it’s clear the company can operate without severe restrictions. The chain’s debt includes a 4.05 billion peso ($202.6 million) term loan and a 640 million peso term loan, both due March 2023. After the COVID-19 pandemic shuttered theaters around the world last year, Cinemex pumped cash into its business to keep operating and kept up interest payments even as new releases from Hollywood petered out. The company’s U.S. unit, Cinemex Holdings USA Inc., filed for bankruptcy last year and emerged after renegotiating certain leases.