Commercial property group Becton has been placed in limited receivership as the company struggles to survive under the weight of about $250 million in debt.
The collapse comes as a number of development and construction companies have been placed in either administration or receivership over the past few years, with the industry making up a sizeable percentage of the total number of insolvencies recorded last year.
The impact of Becton’s limited receivership has spread across the construction industry. Shares in Mariner Corporation fell 40% yesterday after the company confirmed it was Becton’s largest shareholder with an 18% holding.
Becton was placed in limited receivership yesterday, with Mark Korda and Janna Robertson of KordaMentha appointed.
The structure of a limited receivership means a small number of holding companies are now placed in receivership, but according to KordaMentha, “there is no impact on the Becton operating companies involved in construction, development and retirement businesses”.
The company manages a large number of projects, including the Sydney Dee Why Gardens retirement village, along with the massive $733 million Newleaf social housing project in western Sydney.
A spokesperson for the receivers told SmartCompany, “Like many companies, Becton was affected by the global financial crisis and had to refinance.”
“The industry as a whole has had problems.”
SQM Research managing director Louis Christopher also told SmartCompany Becton was highly exposed to the fallout in the financial sector in 2008 and has struggled in the subsequent years of trading.
“Becton took a big hit back in 2008, and they were highly geared at that time,” he says.
However, there is some hope. Christopher says although there has been a worrying number of collapses in the construction industry, Becton’s problems are not reflective of the industry as a whole.
And he says it’s even likely the company will survive.
“The receivers have come in early, and I think they should be able to trade its way out of the situation once the debt is restructured.”
The company recorded a statutory loss of $17.9 million in its latest annual results, released last September. Becton blamed the result on impairments and non-operating costs and losses of $24.3 million.
The company also said its high amount of debt would be a key challenge for the business going forward.
”Having exhausted all alternatives available to it, the Board therefore has no reasonable basis for believing [Becton] will be in a position to pay its debts as and when they fall due,” the business said in an ASX statement yesterday.
Receivers have confirmed the debt level for the holding companies impacted by the receivership is around $95.5 million, with construction debt of around $155 million, although these figures exclude the aged care business which is not in receivership. The company’s main lenders are Goldman Sachs and Fortress.
The receivers have gone out of their way to emphasise the construction part of the business is still operational.
“The Becton entities responsible for the operations of the business are not in receivership and continue to trade on a “business as usual” basis under the control of their existing officers,” they said in a letter sent to stakeholders.
The entities in receivership include Becton Property Group Limited and some non-trading corporate subsidiaries such as Becton Group Holdings and Becton construction nominees.
The company was founded in 1976 by Rich Lister Michael Buxton, although he and co-founder Max Beck have stopped their day-to-day involvement with the business.
Beck told The Australian he “cannot understand what has happened to the company since I ceased to be involved it”.
“It’s just so tragic that a company that took 30 years to build has been allowed by others to collapse in just a few short years.”
Reports indicate the business had attempted to restructure its debt with both Goldman Sachs and Fortress, but the attempts were unsuccessful. However, the two entities are said to have preferred a limited receivership so construction projects can continue.
Some of the biggest collapses in the past year have been in the construction industry, including the collapse of Hastie Group in May 2012 due to a $20 million fraud.