Administrators seek rescue deal for St Hilliers Construction rather than liquidation

Creditors of failed builder St Hilliers Construction will be asked to vote for a deed of company arrangement (DOCA) rescue package rather than push the company into liquidation.

Administrators will send out documents to creditors this week proposing the DOCA and asking for a meeting to vote on the proposal.

Creditors include staff, who are owed around $3.6 million, and sub-contractors, who are owed around $10 million.

According to ASIC, a deed of company arrangement (DOCA) is a “binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with and aims to maximise the chances of the company, or as much as possible of its business, continuing, or to provide a better return for creditors than an immediate winding up of the company, or both”.

St Hilliers Construction was placed in administration on May 16 ,with Trent Hancock and Michael Hird of Moore Stephens Sydney Corporate Recovery Group appointed as voluntary administrators.

The collapse was sparked due to funding issues relating to the expansion of the Ararat prison in Central Victoria

An associated company, St Hilliers Ararat Pty Ltd, part of a consortium contracted to undertake the $350 million expansion of the prison, was placed in liquidation at the same time that St Hilliers Construction was placed in administration.

The construction arm of St Hilliers had about 360 people employees at the time of its collapse, with group annual turnover of around $700 million.

Should St Hilliers be placed in liquidation, insurance bond providers would have a $45 million exposure, reported The Australian.

Insurance bond providers provide protection to the contract principal (in this case St Hillers) against default by the contractor. The provider undertakes the credit risk of being unable to recover funds paid out by them under the bond from the contractor.

As St Hilliers has continued to trade and many of the projects are operational again, insurance providers have been largely protected from making payments.

St Hilliers projects have resumed in the ACT, Queensland, Victoria and NSW.

These include the $30 million Bonner Primary School project in Canberra, housing projects for the Department of Defence in Queensland and a $10 million contract to build modular mining housing for Xstrata in Glenden in the Bowen Basin.

Work has also resumed on a public housing project on Harbour Drive in Coffs Harbour– one of 13 NSW public housing projects that the NSW government has taken over following St Hilliers being placed in administration.

The company has its headquarters in Sydney as well as offices in Melbourne, Canberra, and Brisbane.

The collapse of St Hillers followed a spate of high-profile building collapses including Kell & Rigby and Reed Construction.