Probuild creditors who are owed millions of dollars from the collapse of the construction business have been sent a proposal that the administrator believes could deliver them a substantially better outcome than a formal liquidation process.
Under a proposed Deed of Company Arrangement (DOCA), from the administrator Deloitte, employee entitlements are to be paid in full and earlier, than what would happen in a liquidation scenario and the average return to small creditors (under $25,000) could be between 50 per cent and up to 71 per cent.
Furthermore, distributions to unsecured creditors could be between an estimated $9.4 million and $45.1 million.
Probuild’s South African parent pulled financial support from its Australian business on February 24 leaving 2300 creditors and 786 employees with an uncertain future.
In late February, Deloitte Turnaround & Restructuring partners Sal Algeri, Jason Tracy, Matt Donnelly and David Orr were appointed joint administrators of 18 entities in the WBHO Australia Group.
On Deloitte’s appointment, the partners started an urgent sale process that resulted in the engineering firm SRG Global paying $15.2 million to take over Probuild’s West Australian arm, while the Sydney-based Roberts Co agreed to acquire five of the Victorian assets of the collapsed company.
The deal comes as the construction sector is facing strong headwinds due to rising interest rates, supply chain issues, cost blowouts and labour shortages.
Probuild is just one of many groups that have collapsed or a teetering on the edge. Others that specialise in home constructions that have become insolvent include ABD Group, Privium Home, BA Murphy, Condev, Next Construction and Pivotal.
Probuild creditors will have the opportunity to vote at a second, virtual meeting next Thursday, June 30, to either return the company to the directors’ control, accept the DOCA, or put the companies into liquidation.
If approved, under the plan, once outstanding assets have been realised, a dividend will be paid to all other creditors and the companies will be handed back to the directors to be deregistered. Deloitte said this may take more than 12 months to complete.
Deloitte’s partner Sal Algeri said it is the opinion of the administrators that it is in Probuild’s creditors’ interests to vote in favour of the DOCA as it provides, based on current expectations of asset realisations, for a better outcome than in a liquidation scenario.
“This is an important milestone in what has been as highly complex and high-profile process. It’s certainly a proud achievement for our team,” Algeri said
“In just over four months, our strategy of continuing to trade, recommence certain key projects, and pursuing an accelerated sale of the business, has assured the completion of six key projects, continuity of employment for more nearly 200 people, continuity of business for subcontractors, and a significant reduction in overall creditor claims of $270 million.”
Algeri added that without Probuild creditors agreeing to the deal, the potential failure of subcontractors, and the associated impacts on business owners, their employees and the Victorian economy, and the potential flow-on industry impacts, “can’t be underestimated”.
“Creditors now have the opportunity to make a final decision on the future of the companies, including the best possible returns available via the proposed deed of company arrangement,” he said.
Source: Thanks smh.com