Small creditors of Probuild have been spared financial pain from the collapse of one of Australia’s largest construction groups after receiving a total of $1.8 million from administrators – a payout that representing 100 cents in the dollar for the debts they were owed.
The administrators of the Probuild, WBHOI and Monaco Hickey Group of companies today revealed that all creditors with debts of $25,000 or less have been paid in full after the building giant was placed into administration in February this year with debts of more than $617 million.
The sale of assets following the collapse, including Probuild’s Victorian business, reduced the overall debt by $270 million as the company entered into a deed of company arrangement (DOCA) with creditors in June.
The administrators say the DOCA helped save more than 475 jobs and allowed work to continue on about $2 billion in active and future projects under way by the group.
The payment to small creditors comes on the heels of the distribution of more than $16 million to former employees on 30 September, accounting for all of their outstanding employee entitlements.
“The payment to small creditors today represents a significant milestone and underscores the value preserved for creditors by maintaining major building projects on foot to save jobs and avoid significant subcontractor collapse,” says Deloitte Turnaround & Restructuring partner Jason Tracy.
Tracy was appointed administrator of the Probuild group in February along with colleagues Sal Algeri, Matt Donnelly and David Orr.
Deloitte T&R’s efforts in achieving the latest payout were buoyed by agreements reached to sell most of Probuild’s Victorian assets to Roberts Co which occurred within a week of being appointed administrators. The sale effectively stripped $270 million of the debt ledger which Deloitte T&R says prevented job losses and a wholesale collapse of downstream smaller contractors.
“As administrators, our key objective at the outset was to maintain the business operations and employment to the greatest extent possible, Probuild being one of the few contractors in the industry able to undertake large scale projects,” says Algeri.
“We recognised the value in the strong reputation and relationships that the group had with many key stakeholders including the unions, principles, and other key stakeholders.
“We worked closely with management to preserve those relationships which enabled us to move quickly and keep projects ‘live’.
“In a situation like this, you also only get one shot at saving the business by finding the right buyer, so early engagement with stakeholders and eventual novation of contracts to a new owner were all highly critical to the outcome.”
Orr says the Probuild collapse highlighted some of the key structural issues confronting the building sector in Australia.
“Notwithstanding the disruptions caused by COVID-19, key structural issues in the sector revolve around fixed price contracting and inappropriate risk sharing models,” he says.
“All too often the sector displays weak balance sheets dependant on debt funding models that provide little or no resilience for even a small proportion of ‘bad’ projects. And all of this is compounded by labour and skills shortages and the pressing need to reshape work culture, diversity, and inclusion across the sector.”
The Probuild group collapse was triggered after its South African-based parent company Wilson Bayly Holmes - Ovcon Limited (WBHO) pulled financial support, citing COVID-19 restrictions in Australia as the catalyst for the businesses’ demise. The move directly impacted the group’s Australian project management businesses Probuild, Monaco Hickey and WBHO Infrastructure, along with the group’s multibillion-dollar project portfolio which included 10 active developments in Victoria and three in NSW.
Probuild had a total of 2,300 creditors when it was placed into administration and close to 800 employees.
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