Liquidators estimate $16m shortfall from Stanley-Tallwood collapse
By Victoria Young
Sept. 13 (BusinessDesk) - The liquidator for Stanley Group and associated companies, including prefabrication firm Tallwood Holdings, has estimated a $16 million shortfall from the construction group's failure.
Damien Grant’s first report on Stanley says the company came unstuck when trying to expand out of Waikato and into Auckland. It also signals that directors may have breached the retentions scheme designed to protect subcontractors’ money.
The liquidator has produced separate reports for the Stanley group of companies and Tallwood Holdings, but points out the companies worked closely as “integral units”. Prefabrication arm Tallwood was established just last year.
The creditors’ shortfall for Stanley is estimated at more than $13.5 million, while Tallwood’s total shortfall is reported at about $2.7 million. The Matamata-based group had employed 100.
Five other entities associated with Stanley and three others associated with Tallwood are in liquidation with Grant appointed. The key directors across Stanley and its subsidiaries are Kevin Stanley, Craig Davison and Robert Marshall.
The trio are also directors of Tallwood Holdings and related companies along with Robert Cornish, Daiman Otto and Christopher Udale
Several units of the businesses in liquidation and a joinery business - Stanley Interiors - are in receivership with Kiwibank appointing Jared Booth and Tony Maginness late last week. Stanley Interiors is in receivership only.
According to Grant's report, Stanley had struggled with expansion into Auckland.
“The business continued to win work, but was unable to maintain control of its costs and quality,” he says.
The difficulty in the supercity market is reminiscent of Ebert Construction, which was moved into liquidation and receivership last year after struggling with expansion out of its expertise with dairy driers into the Auckland housing market.
Grant says Stanley under-quoted on a Mangere project for Housing NZ, which created severe liquidity pressure. The report says the directors told the government department that they were experiencing solvency issues and were struggling to cover subcontractor payments.
It says that the directors told liquidators they believe they under-priced the Housing NZ job by $2 million and that cost overruns on the project eroded working capital.
Housing NZ, whose contracts were with Tallwood, said in a statement it is auditing how much is due to be paid and what it will cost to complete the projects.
“Some subcontractors have already been set up in our procurement system so there are no further delays to payment once amounts are established.”
The Mangere project, at Cessna Place, will require a replacement lead contractor, while the work Tallwood was doing in Whakatane is “near complete,” Housing NZ said.
Housing NZ said it is in the process of taking back a Hamilton East site from Tallwood, and tenants are currently moving into ten homes, with 20 more to be completed.
“We don’t expect there be a significant delay to the completion of the homes at this stage.”
Housing NZ said that Tallwood was on its offsite manufacturing panel but there were ten other current suppliers on it.
“There are no other projects Tallwood or Stanley had won,” the government department said.
As with Ebert, the liquidators have indicated there will be a shortfall in the retentions being held by the Stanley companies.
Following Mainzeal’s collapse, a new law was created that said construction firms should hold retentions on trust, in a separate account, for subcontractors.
Stanley’s liquidator says it is too early to confirm, but there may have been a breach of the construction law which provides for subcontractors’ retentions.
The report says the companies held about $1.8 million in performance bonds, part of which is in a loan to Kiwibank. The bonds are certain to be called up, the liquidator indicated.
Across both groups of companies, the liquidators estimate about $500,000 in preferential claims to employees.
Grant’s report says the top ten creditors in the liquidation, mostly subcontractors, lost $3.1 million. The next ten creditors lost an average of $168,205 each. In contrast, the smallest 287 creditors lost a total of $46,588 with an average of just $162 each.