First Strut’s liquidation puts Sanlam and Investec’s money managers at risk. First Strut is an engineering company and the holding name for First Tech Group. The company that supplied the mining, power and transport industries has been placed under liquidation.

Sanlam invested R236 million, the second largest investor, in a floating-rate note through Bacarac Trading. While Investec Asset Management invested R435 million – this is according to court documents filed on 16 July 2013 in Pretoria. According to those documents, Bacarac Trading was created solely for investing in First Strut floating-rate notes.

Kobus Moller, financial director at Sanlam, said a large portion of the investment is in Sanlam’s corporate-debt portfolio. Moller said:

This exposure is adequately provided for. Policyholders are not affected.

Apart from investing, a sum of R240 million was loaned to First Strut by Investec Plc. First Rand Ltd (FRR) loaned the company R200 million and Rand Merchant Bank invested R50 million in the floating-rate notes.

After First Strut’s chairperson Jeff Wiggill was murdered last month, the company was liquidated due to unpaid debts. And on 16 July 2013 it was placed under provisional liquidation due to failed rescue attempts. Leslie Matuson and John Louw were appointed as business rescue practitioners. An affidavit filed by Matuson on 16 July 2013 said:

All secured creditors were unanimous that they were not prepared to put any further funds into the group. The financial position of the respondent and other entities is so dire that they could not even make payment of the weekly wages due July 12, given that all bank accounts were frozen.

[Source: Mail&Guardian, BusinessWeek]