Jefferies fund caught with $500mn exposure to second alleged invoice fraud
Point Bonita, which bankrolled collapsed First Brands Group, emerges as big creditor to Radiant World
The Jefferies-managed fund that lent to collapsed auto parts group First Brands Group has almost $500mn worth of exposure to troubled iron ore trader Radiant World and another entity, ranking it among the biggest creditors in a second high-profile alleged fraud.
Jefferies asset management unit last week obtained a freezing order for up to $499mn from London’s High Court against Radiant World, its founder Pinkesh Nahar, an allegedly affiliated company called Sapphire Minmetals and its chair Rakesh Sethi, according to people familiar with the matter.
It puts the Jefferies fund’s exposure to Radiant and linked companies significantly higher than previously reported and underscores its role as a key financier of the two iron ore traders.
Troubles at Radiant have dealt another setback to Point Bonita, a private credit fund within Jefferies’ Leucadia Asset Management that specialises in invoice-backed lending, after the implosion of First Brands Group. The US investment bank revealed $715mn of exposure linked to the Ohio-based business last October.
Radiant, a little-known company that rapidly grew into one of the largest iron traders in the world, has come under pressure in recent weeks after several lenders cut ties with the group over alleged inconsistencies in the documentation underpinning its financing.
The company and Nahar, both of whom are subject to legal proceedings, have denied any wrongdoing.
Radiant and Sapphire have both stated that they are independent companies. However, Radiant previously owned a majority stake in Sapphire until 2015, according to Hong Kong company records. One person who worked with Radiant on its financing described Nahar and Sethi as “business partners” who had “known each other for years”.
The freezing order poses a threat to the personal wealth of Nahar, who has amassed a series of trophy assets around the world as Radiant grew into one of the largest iron ore traders in the world.
Companies owned by Nahar purchased two luxury apartments in London’s Fulham for a total of £12.15mn in August 2022, according to UK property records. Nahar also chairs a Bollywood film production company in India and owns a Singapore-based investment firm that buys stakes in technology companies.
The trade finance fund began providing financing to Radiant in 2021, and its exposure grew from $35mn to hundreds of millions of dollars over the next four years, according to people familiar with the matter.
But as Point Bonita faced a wave of redemption requests from investors in the wake of First Brands’ collapse, it moved to stop rolling existing facilities it had with the commodities trading firm, creating liquidity problems for Radiant, they added.
Point Bonita in April signed a forbearance agreement with both Radiant and Sapphire, according to people familiar with the matter. The contracts typically allow companies that have defaulted on their debt to set up a payment plan or put up more collateral to avoid the lender demanding immediate repayment.
Jefferies is facing two separate lawsuits from an investor in and a lender to Point Bonita over its First Brands exposure. Point Bonita had $3bn in gross assets at its peak before First Brands’ collapse, with Jefferies previously stating that it had a 5.9 per cent stake in the fund’s $1.9bn equity.
The Wall Street bank has denied claims of fraud in the two cases and has said the lawsuits are without merit. Jefferies accused Western Alliance, the Point Bonita lender which is suing, of making “false and misleading” statements over the First Brands dispute.
Jefferies declined to comment. Radiant, Sapphire, Nahar and Sethi did not respond to requests for comment.