Grocon boss Daniel Grollo has apologised to unsecured creditors for the company’s deepening financial issues due to its long-standing legal battle involving the NSW government and James Packer’s Crown Resorts.
At first meeting of creditors, the company’s backers caught up in its $1 billion collapse heard they will likely get very little back if the 39 subsidiaries placed in administration by KordaMentha are liquidated.
The entities placed into administration, comprise just under a third of the 125 companies in the group, and include head company Grocon Pty Ltd, which acted as central treasurer for the other businesses.
Addressing roughly 30 creditors, Grollo again blamed its failed Central Barangaroo project for the cause of all its financial problems.
At Barangaroo, Grocon was in a joint venture with another developer, Aqualand, and shopping centre giant Scentre to build a shopping centre and apartment tower as part of its largest project to date that would link Crown’s hotel and casino development.
Grocon withdrew from the project in September last year, selling its stake to Aqualand for $73 million.
This came after Crown and its development partner settled a court battle with the NSW government over its right to build towers that impeded the view from Central Barangaroo to the harbour.
Grocon is in the process of suing state-backed delivery authority, Infrastructure NSW, over the same issue, accusing it of selling the same views twice.
“Today is a difficult day in the 73-year history of Grocon,” Grollo said.
“While we have wanted to move away from construction during the last few years, we have found ourselves closing it down in a most undignified way, causing pain to employees, creditors and creditors’ employees [and] for that I am very sorry.”
Grollo told creditors the company had been undone by a secret agreement between Crown Resorts, Lendlease and Infrastructure NSW.
“The cause of this administration I firmly put at the feet of Infrastructure NSW.
“Seven years ago, Grocon bid for, and won, the developments rights to the Barrangaroo project in Sydney.
“Little did we know then that I would be standing before you today as a result of the subsequent unconscionable behaviour of iNSW.
“The Central Barangaroo project was taken away from us, we were obstructed deliberately from being able to realise the profit potential of that project,” Grollo said.
Grollo said the company will continue to pursue the proceeding, to the tune of $270 million, as a primary initiative of the organisation.
“My primary goal as I look forward to the next year is to win that court case and take the company forward in new directions.”
Grollo also flagged hopes of proposing a deed of company arrangements (DOCA) that would see creditors paid out from the proceeds of a court victory.
This could leave creditors with a choice between waiting for the outcome of the complicated legal case, to be heard next year—or potentially early 2022, or a liquidation, which could provide only a limited return.
While the first administrator’s report is due to be finalised next Wednesday ahead of a crucial second creditors’ meeting on December 23, preliminary investigations by Kordamentha found 35 companies in administration have claims totalling $723 million.
The administration involves dozens of sub-companies, debts to parts of the empire that are not being declared insolvent, and a maze of inter-company loans in the hundreds of millions of dollars.
Upwards of 30 Grocon companies not in administration are owed $318 million from those in administration.
Money owed to external creditors is relatively small with about 70 third party trade creditors owed between $8.5 million and $10 million and the Australian Taxation Office owed about $14 million.
KordaMentha administrator Craig Shepard told creditors that a number of sales campaigns across a number of smaller assets had been rolled out in order to release “some equity” — including a $2.6 million apartment, and another property for $1.65 million.
Shepard said it would also move to seek court approval to extend the convening period between creditors meetings to up to 120 days to allow for additional time to consider any DOCA proposal versus liquidation.
Last week, Grocon was terminated as the developer and builder of a $111 million office project in Melbourne's Collingwood by Impact Investment Group, a fund manager backed by the ultra-wealthy Liberman family.
Impact said Grocon had been terminated as developer with subcontractors owed $8 million and the fund manager and its investors—mostly self-managed super funds—left $20 million out pocket.
While the initial KordaMentha administration appointments excluded the active project, the projects abrupt cancellation will likely tip even more Grocon entities into administration.