St Hilliers construction arm placed in voluntary administration

The Australian building and construction industry has been plunged into deeper crisis with the construction arm of St Hilliers being placed into voluntary administration due to funding issues relating to the Ararat prison project.

An associated company, St Hilliers Ararat Pty Ltd, part of a consortium contracted to undertake the $350 million expansion of the Ararat Prison in central Victoria, has been placed in liquidation.

A statement on the St Hillers website says that Michael Hird of Moore Stephens Sydney Corporate Recovery Group has been appointed as voluntary administrator.

The construction arm has been placed in administration “due to exposure under guarantees for debts of St Hilliers Ararat Pty Ltd relating to the Ararat Prison project in Victoria”.

“Negotiations over several months between the Ararat Prison equity investors and its bankers in conjunction with the state of Victoria have failed to reach a definitive agreement for additional funding of approximately $150 million.

“The St Hilliers Group could not allow further debts to be incurred without adequate funding. As a consequence, the group determined that the only prudent course of action was to cease work on the Ararat project and place St Hilliers Construction Pty Ltd into voluntary administration.”

St Hilliers Group executive chairman Tim Casey described the decision to place the construction arm in administration as “very regrettable”.

“We have over a number of months explored and exhausted all possible avenues to recapitalise the construction business and find a solution to the significant cost and time overruns on the Ararat project.

“Unfortunately a solution was not possible under the current regime.

“We will now work actively and constructively with the administrator and all stakeholders to continue all viable projects and to find a way to restructure the construction business going forward.

“For the rest of the St Hilliers Group it remains business as usual,” Casey says.

The construction arm employs about 360 people, and the group has annual turnover of around $700 million with a head office in Sydney as well as offices in Melbourne, Canberra, and Brisbane.

Its collapse adds to the growing number of building companies that have collapsed recently.

According to a SmartCompany review of insolvency appointments in March, more than 80 building and construction firms entered administration, liquidation or were hit by a winding-up notice over the previous month on the east coast alone.

High-profile collapses have included century-old building firm Kell & Rigby, with creditors voting in April to liquidate the business. Other collapses include Royal & Taricon Construction, Amorin Constructions, BQL Constructions, Bina Constructions, Simtom Constructions, Australian Property and Construction Pty Ltd.

The $400 m Ararat prison project (artist's impressions above and below) is a joint venture with New Zealand firm Hawkins and is being built to address a shortage of prison facilities in Victoria and was commissioned by the Brumby government in 2010.

The project is about 18 months behind schedule, with unions claiming that subcontractors are owed more than $10 million. Last week the consortium told subcontractors there was no money to pay them.

Only 12 workers turned up to work on the project last week out of 250.

Earlier this month concerns were reported about St Hilliers being able to complete the prison project, with construction union Victorian secretary Bill Oliver writing to the company to express concerns about non-payment of suppliers and deterioration of health and safety on other St Hilliers sites.

The administration does not involve St Hilliers Property Pty Ltd, the entity responsible for the group’s activities in funds management, property development and asset management with independent custody arrangements in place.

According to a statement posted on the St Hilliers website, the administrators will be seeking to complete viable projects once they assess the position of each of the projects.