A Deed of Company Arrangement (DOCA) is the preferred way forward for creditors of the in-administration Australian arm of property and construction firm Wilson Bayly Holmes - Ovocon (WBHO) according to administrators Deloitte, following the divestment of several subsidiaries and key Probuild projects.
Administrators of WBHO, the parent company of Australian construction company Probuild, Monaco Hickey and WBHO Infrastructure will tell creditors at a meeting on 30 June that their preference is creditors accept a DOCA, preferring it over liquidation.
In a summary of the report to creditors, Deloitte says sales of WBHO companies have reduced total liabilities so far from approximately $617 million to $347 million, as well as having saved nearly 200 jobs and ensured the ongoing construction of six key builds.
Included in these sales was the Roberts Co purchase of Probuild’s Victorian assets for an undisclosed amount and SRG Global acquiring WBHO Infrastructure’s Western Australian business for $15.2 million.
In addition, Deloitte says the proposed DOCA could deliver “substantial further benefits for creditors compared to those likely to be achieved under a formal liquidation process”.
These benefits include the employees seeing their entitlements paid in full and earlier than in a liquidation scenario, and an average return to small creditors (owed less than $25,000) of between 50 per cent and 71 per cent, and to other creditors between 3.9 per cent and 24.6 per cent.
Unsecured creditors are also likely to receive some money back too under a DOCA of an estimated $9.4 million to $45.1 million.
As for the other projects that failed to find a new owner, Deloitte turnaround & restructuring partners Sal Algeri, Jason Tracy, Matt Donnelly and David Orr said they were returned to the relevant developers, with “orderly transitions agreed with most clients in order to minimise disruption to the project”.
“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 sub-contractors, and a significant reduction in overall creditor claims of $270 million.
“Without this outcome, the potential failure of sub-contractors, and the associated impacts on business owners, their employees and the Victorian economy, and the potential flow-on industry impacts, also can’t be underestimated.”
Creditors will decide the fate of WBHO next Thursday, but the administrators have made their opinion clear: “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”.
“Had the administrators not sold certain group assets/projects, creditor claims associated with these projects would otherwise have crystallised,” the administrators said.
“Instead, liabilities have been reduced from an estimated $617.4 million at the date of appointment, to an estimated $347.2 million at 10 June 2022 – a reduction of approximately $270 million, and including $139.7 million from the Roberts Co transaction and other novations (and including employee entitlements), and $39.5 million from actions taken by WBHO Construction SA (in addition to the value offered under the DOCA).”
Under the DOCA, employees will be paid their outstanding entitlements as soon as 30 September, with small creditors to receive a distribution “shortly thereafter”.
“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. This may take more than 12 months to complete,” the administrators said.
Following an investigation, the administrators said they had come to a preliminary view that the Probuild Group became insolvent by 1 February.
According to the report summary, the administrators pin the collapse on a number of factors including:
- Large losses on the two projects (Western Roads Upgrade in Melbourne and Queen St in Brisbane)
- The cumulative impact of smaller losses on other projects
- The withdrawal of shareholder support
- Increasing costs to complete contracts due to COVID-19 effects on margins and resultant project delays.
“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,” Algeri said.
Since WBHO’s collapse, a number of other large Australian construction firms have met their demise including boutique investment firm REMI Capital, Gold Coast builders Pivotal Homes and Condev Construction, Sydney developer Next.
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