Jaco Visser and Renee Bonorchis

First Strut, which may become the first South African company to default on a bond, had misled Global Credit Ratings, which assessed the engineering and manufacturing company’s debt, the ratings company said last week.

First Strut “wasn’t completely honest with us”, Global Credit’s head of corporate ratings, Eyal Shevel, said. “We rely heavily on audited accounts. We rely on auditors doing their jobs.”

First Strut is being wound down after attempts to salvage the company failed.

Lenders had refused more funding and bondholders had won a court order to gain control of assets for security, Leslie Matuson and John Louw, appointed to try and rescue the business, said in court papers filed on July 16.

Global Credit gave First Strut’s R925 million of secured three-year bonds an investment-grade BBB rating, higher than the company’s non-investment level.

Mark Shelley, who is listed as First Strut’s auditor in court documents filed by Matuson and Louw, could not be reached for comment. Three calls to Indigo Chartered Accountants, where Shelley works according to the Independent Regulatory Board for Auditors, were not answered. There was no response to an e-mailed request for comment sent to the account supplied by the regulator for Shelley. Calls to phone numbers provided on First Strut’s website were not answered and e-mails did not receive responses.

First Strut had been given clean audit reports with no qualifications, Shevel said.

First Strut’s liquidation came after the murder of chairman Jeff Wiggill in June in Soweto. Wiggill’s shooting might have been a contract killing, the Star newspaper reported last month, citing the bail application of a man arrested for his death.

The company, which was founded more than 20 years ago, had 18 units supplying industries ranging from rail to mining and employed about 5 000 people, according to its website.

Wiggill picked up an employee on the night of the murder and then drove to Soweto where he was found shot dead the next morning, the Mail & Guardian reported on Friday, citing surveillance cameras and evidence taken from his car.

Investors, including Investec Asset Management and Sanlam, bought First Strut’s notes through a specially-created company, Bacarac Trading 142, according to court documents. The debt was secured through a general notarial bond over First Strut’s movable assets, such as plant equipment and the debtors’ book, Shevel said. Bacarac enforced the notarial bond on July 12, according to court papers.

Banks and investment funds may lose at least R1.5 billion, according to Bloomberg’s calculations. Many lenders, including Standard Bank, have refused to disclose how much they lent to the company.

Cosira South Africa, a subsidiary that First Strut bought for R425m last year and which worked on Eskom’s Medupi and Kusile power plants, applied to be placed under business rescue proceedings a week before Wiggill’s death, according to an affidavit by First Strut chief executive Andris Bertulis.

Wiggill was the main contact between the ratings company and First Strut, Shevel said. Global Credit did not get responses for requests for information from First Strut after Cosira was placed into liquidation, he said.

“I don’t know how they turned from a seemingly okay company to this,” Shevel said.

Zeenath Kajee of Westrust, who was appointed as provisional liquidator of First Strut, has declined to comment. – Bloomberg