Leonie Lamont August 06, 2012
Many Reed creditors won't be paid.
FAILED building company Reed Constructions Australia was most likely trading insolvent since mid-March, three months before administrators were appointed.
A creditors' report by Ferrier Hodgson, which has been substantially adopted by the new liquidator, Mark Robinson of PPB Advisory, also shows trade creditors and subcontractors have put in proof-of-debt claims for $85.8 million.
Mr Robinson confirmed to BusinessDay that a trust account meant to contain $7 million in subcontractors' money held as security for performance of work - was ''essentially empty''.
The creditors' report said: ''It was apparent that these moneys had not, in fact, been held on trust by RCA. Rather, these funds have been used to fund working capital requirements on RCA projects.''
The Ferrier Hodgson report says RCA has, at the most, $51.8 million in available assets. After secured and priority creditors were taken into account, nothing would be left to pay $89.2 million owed to unsecured creditors.
The report outlines $114 million in inter-company loans by Reed Constructions Australia to the holding company RBG Holdings Group Pty Ltd, of which $78 million was lent in the year before its collapse to other entities within the Reed group.
''My main focus is RBG Holdings, and its ability to make some money for repayment of inter-company loans,'' Mr Robinson said.
The biggest movement was $43 million in term deposits, which went to pay St George Bank in January this year. The report says the money had been held to ''illustrate RCA had a strong net asset position, so that the company reached NSW government covenant testing requirements''.
Reed's dispute with the NSW government over bills for schools and roads work was identified as one cause of the collapse. The report identifies $46.9 million in claims against the NSW government.
Creditors have been briefed and formed a committee of inspection.
Mr Robinson said a previous deed of company arrangement proposed by the company's founder, Geoff Reed, had now been withdrawn. The deed had estimated a return of 4.1¢ to 5.6¢ in the dollar to unsecured creditors.
Mr Reed's financial position, provided to the administrator, noted his $7.5 million Woolwich home carried a $5.1 million mortgage. His total property assets were $2.4 million, but he had personally guaranteed $67.1 million in bank facilities and bonds entered into with St George, Vero and QBE.
Mr Robinson said he was looking at all options with the claims for the schools and roads work, and would meet this week with the NSW Department of Education and Communities. ''We want to bring some moneys in, sooner rather than later,'' he said, saying a settlement was one of the options on the table.
He agreed with the administrators' conclusions that two contracts transferred out of RCA shortly before it went into administration, had not disadvantaged the company.