The U.K. withdrew government guarantees underpinning Greensill Capital (UK) Ltd.'s pandemic loans to companies linked to metals magnate Sanjeev Gupta due to violations of the terms of the lending program, Sky News reported March 1.

The British Business Bank PLC tapped accounting firm EY and law firm Hogan Lovells to assess whether Greensill breached the rules of the government's Coronavirus Large Business Interruption Loan Scheme, or CLBILS, Sky News wrote, citing unnamed sources. The advisers found violations, particularly on the adequacy of the security taken by Greensill over assets held by GFG Alliance Ltd., the group led by Gupta, according to the report.

BBB notified the specialty finance lender of the guarantee removal. It is unclear if BBB has taken the same action on other lenders availing loans under CLBILS or its smaller counterpart CBILS, Sky News noted.

In February, German watchdog BaFin was reported to have asked Greensill to lower the exposure of Greensill Bank AG to Gupta-linked companies after the group lent more than €1 billion through the German unit, which is being audited on concerns over the risk level it is taking on a single client.

The government's move comes after The Wall Street Journal reported, citing sources, that Greensill was considering filing for insolvency in the coming days following Credit Suisse Group AG's decision to freeze $10 billion of investment funds linked to the company. Greensill is also said to be in talks to sell its operating business to U.S. private equity Apollo Global Management Inc. for roughly $100 million.