The avalanche of sub-contractor insolvencies predicted to follow the sudden collapse of Australian construction giant Probuild has begun.
Less than a fortnight after the company plunged into administration, the seismic ripple effects are already starting to cause financial carnage and ruin.
A Queensland-based glazing contractor on Probuild’s bungled 443 Queen Street residential tower project in Brisbane is among the first of the sub-contractors to fall over.
It is understood Hitec Glazing had been working through a circa $20-million contract on the long-delayed Cbus Property riverfront development.
But late last week, the family-owned business—a manufacturer of aluminium windows and doors headquartered north of Brisbane—was placed in the hands of liquidators from McGrathNicol.
“The liquidators have assumed control of Hitec’s affairs, have entered into possession of its assets and are undertaking an urgent assessment to determine the best course of action to preserve value for stakeholders,” a statement said.
It also said the liquidators were “not continuing to trade Hitec’s business”.
“The liquidators will investigate and report to creditors regarding the causes of Hitec’s financial challenges,” the statement said.
McGrathNicol’s Mark Holland told The Urban Developer it was “too early to speculate” on how much Probuild’s demise contributed to the failure of Hitec.
“As liquidators obviously we’ll have to undertake investigations and form a view on that and there’s probably other things we’ll have to investigate as well,” he said.
Construction has been suspended on the troubled 443 Queen Street project, which is already two years overdue with Probuild’s losses reportedly topping as much as $120 million.
As well as the Queen Street project, Hitec Glazing had been a subcontractor on a number of south-east Queensland high-rise projects, including several on the Gold Coast, in recent years.
The Narangba-based business is listed online as “permanently closed” and could not be contacted for comment.
Industry experts have warned Probuild’s collapse will cause massive losses to sub-contractors and suppliers—collectively believed to be owed millions of dollars—and likely send many of them to the wall.
“It’s a wrecking ball,” a construction sector legal source with clients caught up in the chaos told The Urban Developer.
“The big subcontractors will take a monster hit and still be able to survive but a lot of these smaller ones won’t. It’s peoples’ lives, family businesses. I think it’s going to get pretty ugly.”
In the first glimmer of good news, it has emerged that Sydney-based builder Roberts Co is set to take control of most of Probuild’s Melbourne projects after entering into an in-principle purchase agreement.
Roberts Co chief executive Alison Mirams said it was an opportunistic and strategic play by the privately-owned company that "aligned with its growth plans into Victoria".
It is due to complete its due diligence for the deal over the next two weeks.
Administrators were appointed to Probuild after its South African parent company Wilson Bayly Holmes-Ovcon (WBHO) turned off the financial life support to its beleaguered Australian arm.
“If we knew everything we know today we would have pulled the plug years ago,” WBHO chief executive Wolfgang Neff told an interim results presentation in Johannesburg last week.
He said WBHO had propped up Probuild with substantial parent guarantee support that peaked at $178 million in October last year but “the risk versus reward became untenable” as it sustained mounting losses—mostly from the 443 Queen Street and Melbourne’s Western Roads Upgrade project.
It has been revealed by administrators Deloitte that Probuild owes its 786 employees across Australia “in excess of $14 million” but with 2300 creditors lodging claims so far the value of its overall liability was still unknown.
Deloitte's lawyer Hamish Austin told a Federal Court hearing it was a “highly fluid and complicated administration” and sorting through all the claims was a "nightmarish prospect".
“It’s certainly chilling from where I sit—the idea of trying to untangle all of that,” he said.
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