Edwafin: Class action mooted

Johannesburg - Debenture holders in failed unlisted investment firm Edwafin are considering a class-action lawsuit against current and former executives, said debenture-holder Mario Koppers.

"Nothing has been decided yet. I am simply trying to get feedback from other debenture holders as to whether they would be open to this," said Koppers in an interview with Fin24.com.

A class action lawsuit is when individuals bring a single legal action, normally against a corporate with deep pockets. The aim is to spread the legal costs and provide additional financial "muscle".

In April, troubled investment business Edwafin applied to be placed under judicial management in an attempt to get itself back on its feet. Judicial management would protect the business from claims by creditors including debenture holders who are seeking liquidation of Edwafin. The ruling is expected some time on Monday.

According to the last communication from the company to debenture holders, Edwafin's debts total R228.5m while assets amount to R16.5m.

Market commentators have been warning investors since 2006 against Edwafin's promise of high levels of return. However, it wasn't until October, 2008 that debenture holders became concerned when interest payments from their debentures dried up.

Koppers also told Fin24.com that should there be sufficient support for the initiative the action could be extended to executives who had left the business.

Koppers did not mention specific names, but individuals who have been blamed for Edwafin's problems include its CEO Patrick Stapleton, and Carole Gardiner and Don Hutchinson of Edwabond - the financial services firm responsible for selling the debentures in Edwafin.

Criticism has also been levelled against financial services firms who sold debentures in Edwafin even though they had not been registered by the Financial Services Board (FSB).

Edwabond has recently had its license from the FSB suspended following complaints from investors.

- Fin24.com