Grocon’s creditors must wait to be rescued

Grocon’s creditors must wait until next year for property scion Daniel Grollo to put forward a rescue plan for the company after a court agreed to give administrators KordaMentha more time to report into the builder’s collapse.

The company fell into administration last month and has been battling on a number of fronts as it was terminated off a stalled site in the inner Melbourne suburb of Collingwood and faces the prospect of losing the construction job on The Ribbon in Sydney’s Darling Harbour.

Creditor APN Property Group is also pushing for a liquidation and an in-depth examination of Mr Grollo’s financial position, including his new built-to-rent empire, as it seeks to claw back funds on a soured Melbourne development deal.

The second meetings of Grocon creditors were originally scheduled for December 23, at which time Mr Grollo had flagged he would put up a deed of company arrangement.But the meeting was postponed following permission granted by the Victorian Supreme Court and the administrators report to creditors, scheduled for Wednesday, has been delayed.

KordaMentha’s Craig Shepard said at the first meetings held last week that the complexity of the Grocon entities in administration, which includes 39 companies, the numerous inter-company transactions, and time required to consider any deeds of company arrangement were reasons for delay.

Money owing to external creditors is relatively small with about 70 third party trade creditors seeking $8.5m-$10m and the Australian Taxation Office chasing about $14m.

There are also other claims of about $10m, although there is a separate dispute with Impact Investment Group.The collapse has been complicated by 35 Grocon entities in administration having claims against other collapsed subsidiaries totalling about $723m. Thirty-one Grocon entities not in administration also have $318m in claims against collapsed entities.

The court extended the deadline to March 31, but it is unlikely that much time would be needed, but better to have a buffer for unexpected events. The report to creditors will be distributed one week before the new date for the meetings, which will be announced in the New Year.

The second meetings are when creditors decide whether to hand back the companies to the director, put the companies into liquidation or accept a deed proposed by Mr Grollo or any other party.

The first meeting heard Grocon suffered “significant losses” resulting from its forced exit from the Central Barangaroo in Sydney project in September 2019.

Grocon has been unsuccessful in its attempts to settle the matter with delivery body Infrastructure New South Wales and is now pursuing a $270m legal case.

It has since reached an agreement to exit the Ribbon project in NSW, resulting in the early payment of project margins and mitigating the risk of further losses arising.

Chinese developer Greaton is expected to make an announcement about a new builder this week, with sources saying Multiplex could complete the job.

Grocon had been pursuing a finance package to fund its working capital needs until an outcome in relation to the Central Barangaroo case was achieved but it could not find a backer, resulting in it having insufficient liquidity to support its legacy construction businesses. The case is expected to be heard in late 2021 or early 2022.