Grant Thornton has completed its review into the now in-administration Ralan Group, and thing's aren't looking very promising for the property group's creditors.
Among other startling revelations, Grant Thornton has found the Sydney-based property group had been insolvent since at least June 2014.
But what creditors are likely begging to know is: 'How much will we get back?'.
The answer is likely disheartening; Grant Thornton estimates nil to two cents in the dollar will be recoverable for creditors.
This means that the majority of the $564 million of creditors' owed money will be flushed down the drain.
"This was a large and complex business with a diverse range of stakeholders and creditors," says Grant Thornton Australia national managing partner of financial advisory Said Jahani.
"We received extra time from the Federal Court to conduct a detailed investigation into the causes of Ralan Group's failure and to ascertain what options may be available for the many creditors impacted."
One such option is a claim for $248 million against Ralan Group director William O'Dwyer for insolvent trading, but this is unlikely to reap any rewards as Grant Thornton believes he does not have the capacity to pay this sum.
"Unfortunately due to the extent and duration of the alleged financial misconduct within The Ralan Group, the nature of their funding model, coupled with what we have determined to be a deliberate effort to conceal the extent of debts owed to purchasers who had released their deposits from Ralan's financiers by altering the Group's records for the benefit of William O'Dwyer and his related parties there may be very little left for creditors," says Jahani.
At this stage, Grant Thornton says the secured creditors will get money back by selling the assets which they have security over through their receivers or the administrators.
Those key assets are:
- The Paradise Resort Hotel (land and motel) which was the future site of Ruby Towers 2, 3 and 4. This has been sold by receiver for $43 million;
- Budds Beach which was the future site for the Sapphire Development. This is currently on the market via Knight Frank; and
- Ralan Arncliffe which is a partially completed residential and commercial development. The receiver is currently in the process of completing this development.
The administrators have also found evidence that O'Dwyer allegedly breached a number of sections of the Corporations Act. Additionally, Grant Thornton alleges that the company manipulated financial records which it provided to third parties such as the banks in order to conceal the liability it owed to purchasers for their released deposits.
Grant Thornton's review found that Ralan Group was unable to recover from the collapse of its primary builder, Steve Nolan construction, in February 2014.
Following the collapse of its builder Ralan relied on purchaser deposit monies to bail itself out of its financial hole.
At no time from 2014 onwards was Ralan in a position to pay all creditors in full.
Even if the company was able to secure funding for Ruby Tower 2, 3, 4 and Sapphire it would have incurred an overall loss of over $140 million on these developments and would not have been in a position to pay all creditors in full.
Additionally, the administrator found that there was evidence of numerous breaches of the Corporations Act, including evidence of the company using a Ponzi fund raising model.
Grant Thornton also blames Ralan's collapse on unprofitable developments leading to losses being funded by released deposits and poor management of the group as a whole.
Ultimately, Grant Thornton has recommended that as the group is clearly insolvent a mechanism needs to be enacted to deal with creditors' claims.
Business News Australia
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