Murder Had First Strut Untangling Deals as Bond Called In
The murder of First Strut RF Ltd. Chairman Jeff Wiggill left a web of transactions that had to be unraveled as court-appointed managers battled to salvage the South African company and bond holders sought to recoup their investment, court documents show.
Wiggill, 54, who was also responsible for the manufacturing and engineering company’s finances, was found dead next to his black Bentley in Soweto, southwest of Johannesburg, with bullet wounds to his head on June 20. The shooting was a contract killing, the Johannesburg-based Star newspaper reported last week, citing the bail application of one of the men arrested for his death.
“Due to Wiggill’s untimely demise, and the depressed economic climate, both locally and internationally, and the group’s vast overhead structure, the group has incurred significant losses that have become unsustainable,” Leslie Matuson and John Louw, who were appointed to try and rescue the business, said in court papers filed July 16.
Investec Asset Management, Stanlib Asset Management, Sanlam Group Ltd. (SLM), FirstRand (FSR) Ltd. and Prudential Portfolio Managers are among investors in First Strut’s 925 million rand ($94 million) of notes due September 2016. The companies declined to comment yesterday. First Strut is being closed after lenders refused to provide more funding and bondholders won a court order to take control of some assets as security, Matuson and Louw, who were appointed on July 9, said in court papers to support the company’s provisional liquidation.
Megan Bell, who was an executive director at First Strut, declined to comment and said she no longer worked for the company in an e-mailed response to questions today. Calls to phone numbers provided on the company’s website weren’t answered and e-mails didn’t receive responses.
First Strut, which was founded more than 20 years ago, had 18 divisions supplying industries ranging from rail to mining and employed about 5,000 people, according to its website.
The company, also known as First Tech, may become the first South African company to default on a bond.
“The facts behind the bond default and liquidation of the First Tech Group are not yet clear,” Bernard Fick, chief executive officer of Prudential, said in a July 30 e-mailed response to questions. “Prudential has long highlighted that bond market participants may be too sanguine about the risks of default.”
Investec Asset Management invested 435 million rand in the First Strut notes through a company called Bacarac Trading 142 (Pty) Ltd. Sanlam, South Africa’s second-largest insurer, bought 236 million rand of the bonds, Fairtree Capital (Pty) Ltd. took 131 million rand and Prudential Portfolio Managers purchased 51 million rand, also all through Bacarac.
FirstRand, owner of South Africa’s second-largest bank, loaned the engineering company 200 million rand and invested 50 million rand in the bonds through its Rand Merchant Bank unit. Stanlib acquired 22 million rand of the notes, according to the court documents. Tamara Ross-Gillespie, Bacarac’s sole director, declined to comment when contacted by phone in Cape Town.
The business rescue process, which tries to protect a company from creditors in the hope it can be saved, failed after Louw and Matuson were unable to raise as much as 80 million rand. Matuson met with creditors from July 11 at the Johannesburg offices of law firm Edward Nathan Sonnenbergs Inc. and asked for the money to keep First Strut afloat for one month, the documents showed.
At the July 11 meeting, First Strut’s lenders agreed to pay 6 million rand toward wages as the company’s bank accounts were frozen and power and gas supplies were cut at some sites, while turning down a request for more cash to keep operations going, Louw and Matuson said. The next day Bacarac applied for and was granted a court order to enter and take possession of any premises owned by First Strut and hold the assets for as long as needed, a copy of the order showed.
“There was no prospect for the rescue” of First Strut as the court order granted to Bacarac resulted in several sites being shut down, Louw and Matuson said. Employees were told not to return to work on July 15 as there were no funds for salaries, while a group of 400 workers threatened to burn down First Strut’s headquarters, they said.
Some of First Strut’s businesses had “lucrative contracts of national interest” to South Africa, Louw and Matuson said. This included a contract with a unit of Johannesburg-based Sasol Ltd. (SOL), which supplies about two-fifths of South Africa’s motor fuel, and Eskom Holdings SOC Ltd., the state power utility that’s building coal-fired power plants, they said. Eskom declined to comment, while Sasol said in an e-mailed response that it’s still looking into the matter.
Bidvest Group Ltd.’s Magnum division threatened to pull its security services from the premises of First Strut’s Wire Systems Technology (Pty) Ltd. unit, which it bought from TT Electronics Plc (TTG) in 2010 for about 5 million pounds ($7.6 million), leaving copper at risk of being stolen, Louw and Matuson said. Magnum Chief Executive Officer Dave Crichton wasn’t available for comment yesterday.
Cosira Southern Africa (Pty) Ltd., which First Strut bought for 435 million rand last year according to a July 2012 report by Johannesburg-based Global Credit Ratings Co., applied for liquidation a week before Wiggill was found dead, according to an affidavit filed by First Strut Chief Executive Officer Andris Bertulis.
South Africa’s state-owned Industrial Development Corp. loaned Cosira 123 million rand, spokesman Mandla Mpangase said in an e-mailed response to questions today.
First Tech’s turnover for the year through June 2012 was 2.7 billion rand according to GCR’s report, which cited unaudited management accounts. Net income was 112 million rand, compared with 77 million rand a year earlier, GCR said.
“Since the demise of Mr Wiggill, it has become necessary to unravel a number of complex and intricate financial transactions concluded for and on behalf of the group, including Cosira,” Bertulis said in the affidavit.