Adam Craker, who joined beleagured automotive firm Super Group as its chief operating officer a few weeks ago, has been plunged headlong into perhaps the worst crisis in the company’s history.

For starters, there’s a potential R78m fraud which will probably force Super Group to “restate” its financials (always a throbbing red light for investors). As a main course, there’s a R750m rights issue to raise cash to repay its growing pile of bills, and news that Super Group will fall short of its profit targets by at least 21%.

Spice that all with a 16% plunge in the share price within 48-hours and and it seems Super Group must be feeling rather green after the week’s exposure to kryptonite.

Craker, who worked for another troubled ship in Dimension Data for nine-years, perhaps understates the case when he says its been “a baptism of fire”.

“It’s actually a tremendous way of getting on board, because I’ve got to know everyone very quickly. We could all remind ourselves where Didata was a few years ago,” he says.

Why it should be Craker answering queries is anyone’s guess, given his tenure of exactly one month.

Larry Lipschitz (pictured) has never been the most media-friendly man around, but the speed with which queries were diverted to Craker’s office was notable.

But then, it was Lipschitz’s board who rubbished concerns three years ago that Super Group would face a cash crunch to repay a R900m corporate bond it took in June 2004 at a fixed interest rate of 12,5%. At the time, Super Group’s interest-bearing debt hit R1,3bn (up from R264m).

In September 2005, Super Group published a stock exchange announcement denouncing the speculation as “misleading, irresponsible and sensationalist”. “Super Group has no concerns about its ability to repay its corporate bond in June 2008,” it said.

Well, it turns out the company should have been rather more concerned than it was.

In April, Super Group did manage to repay the R900m, but only by raising another R650m in new debt (including two new bonds). By December last year, Super Group owed more than R4bn in interest-bearing debt.

Craker confirms that the “main driver” of the rights issue is to lower its rising debt levels: “In April when we had to redeem the bond, it was probably the worst bond market in ten years, which made it exceptionally difficult for us”.

But for those investors who took Super Group’s word on how it would handle its debts, the rights issue dents management’s credibility.

The rights offer is being made at R4/share. But after it was announced, the share price plunged 16% from R4,50 to its current level of R3,77.

Craker says Super Group hadn’t expected such a violent reaction, but added “there’s nothing normal in the stock market at the moment”.

Luckily for Lipschitz and his board, Super Group managed to get irrevocable committments from 66% of shareholders that they will take up the offer, before the share price dived.

This includes Allan Gray, who holds 27,4% of Super Group, the Public Investment Corp (13,3%), Sanlam Investment Management (11,1%), Investec Asset Management (9,2%) and Old Mutual (5,3%).

Clearly, some people are quite touchy about this. When asked this week, Allan Gray said it “wasn’t prepared to comment”.

Perhaps this isn’t surprising, given that their investment looks anything but sound: for one thing, the rights offer would have cut December’s half-year earnings per share by 22,4%, and net asset value by 12%.

Compounding the problem, Fitch Ratings raised another red flag on Friday when it placed Super Group on “ratings watch negative” for a possible downgrade in its rating.

Fitch Ratings’ Alistair Crosbie says it looks as if Super Group will have a particularly difficult year.

“Last year, we were concerned with the repayment of that R900m bond. But now, we’re partly concerned with the poor trading update and irregularities, but more concerned with the trading conditions in future,” he says.

Crosbie says Fitch will do a full review once the results of the rights issue is final.

But there is also no assurance that this is the worst Super Group may face, given the details of the fraud in its automotive division.

If Super Group aren’t the most chatty company, they really clam up when asked who was responsible for this fraud.

Says Craker: “we’re convinced at this point there was some fraud, or we wouldn’t have said that .. but it’s premature to pre-empt what Ernst & Young will come up with”.

But he is adamant that Super Group will lay criminal charges against those responsible.

The fraud took place between January 2007 and March 2008 in the management accounts of its Equipment and Commercial Vehicles business, as well as its MMS Cranes business.

Details are sketchy, but it seems that records of what was owed to Super Group’s foreign creditors was “misstated”, and there were errors in how the company’s stock was priced.

This is a pretty big error — estimated at between R78,1m and R42,6m — so you hope the company lives up to its promise to enlighten shareholders about what went wrong, who was involved, and why its bosses didn’t spot this earlier.

But even once all the murky dealings have been disclosed, it will be a long slog for SuperGroup to re-establish any credibility with investors.

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