South Africa’s Biggest Banks at Risk in BankruptcyRenee Bonorchis
Investec Plc and Standard Bank Group Ltd. are among South African banks at risk of losing money after the collapse of First Strut Ltd., the Johannesburg-based company which is in liquidation.
Investec, the owner of a bank and money manager, loaned about 240 million rand ($24.5 million) to First Strut and the debt is “fully secured on underlying collateral which is predominantly property,” Ursula Nobrega, head of investor relations at Investec, said in an e-mailed response to questions late yesterday from Johannesburg. Investec Asset Management has also invested client funds in First Strut bonds, said Nobrega. That unit declined to disclose details of client exposure today.
First Strut, a manufacturer supplying the transport, mining and power industries, was placed in provisional liquidation on July 16, said John Louw, business rescue practitioner for the 5,000-person firm. That came after Jeff Wiggill, chairman of the company which also trades as First Tech Group, was murdered.
Wiggill, 59 was found last month next to his car in Soweto with bullet wounds to his head, the South African Press Association reported June 20. His wallet and mobile phone were missing and the motive for the killing was unknown, SAPA said, citing police captain, Augustinah Selepe.
First Strut Chief Executive Officer Andris Bertulis was unavailable for comment, according to an e-mailed response from Megan Bell at First Tech Group.
Standard Bank Guarantee
Standard Bank, Africa’s largest bank, had a so-called performance guarantee facility with First Strut worth 103.3 million rand, according to a document on First Strut’s website. Standard Bank declined to comment because of client confidentiality agreements, said Ross Linstrom, a spokesman for the Johannesburg-based lender.
First Strut, which sold 450 million rand of senior secured bonds in 2011, has 925 million rand of floating-rate notes outstanding, according to data compiled by Bloomberg. Global Credit Ratings withdrew its coverage of First Strut bonds this month, after initially rating them BBB.
FirstRand, the country’s second-biggest banking group, was also involved with First Strut as was Sanlam Ltd., the country’s largest South African-based insurer, which has asset management units. FirstRand and Sanlam’s potential losses are “provided for,” both of the companies said in separate statements, without disclosing how much money they may have invested or loaned to First Strut.
“Nedbank is one of a number of financiers that has credit exposure to the First Strut Group of companies and is adequately provided,” Mike Brown, the bank’s chief executive officer, said in an e-mailed response to questions late yesterday.
Rand Merchant Bank, the investment banking unit of FirstRand Ltd., acted as lead manager for the sale of First Strut’s 925 million-rand bond. With First Strut under provisional liquidation, RMB doesn’t want to comment on the matter, spokeswoman Joandra Griesel wrote in e-mailed comments.
Investec fell as much as 2.3 percent, the most of South Africa’s five largest banks, and was trading 1.6 percent lower at 67.66 rand as of 2:11 p.m. in Johannesburg trading, while FirstRand declined 0.7 percent.