Failed building group Reed Constructions may well have been trading while insolvent for several months before it officially entered administration, the liquidator of the company has suggested.
The business has been one of the biggest in the industry to collapse so far this year. At the time, small business advocates warned subcontractors were unlikely to be paid and would end up collapsing as well.
Liquidator Mark Robinson of PPB Advisory told SmartCompany this morning that although an investigation is still ongoing, it may very well be Reed was insolvent as early as March.
“We’re still doing a lot of work there…but it could well be earlier than that date,” he says.
Robinson also confirmed there were no funds in accounts dedicated to holding onto money for subcontractors as security.
A creditor’s report compiled by administrators Ferrier Hodgson, which has been adopted by PPB, also put together a number of scenarios whereby creditors would receive payment – a low estimate and a high estimate.
The low estimate suggests neither group would receive any return at all. The report suggests that “creditors should expect that the low range recovery is more likely than the high range”.
The report also details intercompany loans granted by Reed Constructions to holding company RBA Holdings Group, to the tune of $114 million. Earlier this year, Reed paid $43 million in term deposits in order to “illustrate RCA had a strong net asset position, so that the company reached NSW government covenant testing requirements”.
The company had been in dispute with the New South Wales Government over some projects. The report even says this may have contributed to the company’s collapse.
The report also claims, as of July, $85.8 million worth of unsecured trade creditor proof of debt forms had been received.