Mainzeal receivership fallout spreads

CATHERINE HARRIS AND HAMISH RUTHERFORD
Last updated 14:45 07/02/2013

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Hundreds of sub-contractors are thought to be caught up in the receivership of the country's third largest construction company, Mainzeal Property and Construction.

The company, which has 400 staff, was put into receivership yesterday by its sole director Richard Yan.

Receivers PricewaterhouseCoopers said earlier today they were unable to say yet how much debt was involved.

In a PWC statement, Yan said the company's collapse was due to "a series of adverse events" and the general downturn in commercial construction.

But former directors said in a statement yesterday that the company had been battling with legacy issues from leaky buildings.

It was also dealing with disputed payments over a large contract, believed to be a project at Benmore.

Another issue was delayed deliveries from a Chinese supply chain. A source said this included supplies from King Facade Ltd, a company associated with Yan.

Graham Burke, the president of Specialist Trade Contractors Federation, said the collapse of Mainzeal was likely to affect many small associated players.

"I would suggest there would be at least three to four subcontract companies for every employee of a company like Mainzeal, and then those sub-contractors will employ anything from one to a hundred employees themselves."

He said comments that Mainzeal workers were likely to easily find work, failed to acknowledge the financial peril its "subbies" faced.

"Yes, they will be able to find work but their business may have failed in the meantime.

"If they have to write off a large amount of debt, given that we've had quite a sustained period of low construction activity, people have been working on very tight margins.

"It's a really bad situation potentially."

Others beginning to feel the fallout included Horizon Energy, an electricity lines company in the Eastern Bay of Plenty, which said its subsidiary, Aquaheat, was likely to be severely impacted.

Mainzeal workers were still reeling from yesterday's surprise announcement.

One source within the company said receivers had spoken to the staff this morning and they were coping "as well as can be expected".

Another source said staff were in shock but it was likely that many of the company's South Island workers would find another job.

"If ever something like this was likely to happen, it's happened in the middle of a boom."

Yan and chief executive Peter Gomm could not be contacted earlier today.

But three of Mainzeal's parent company directors, Jenny Shipley, Clive Tilby and Paul Collins, explained in a statement what caused them to resign on Tuesday.

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Originally on the construction company's board, they said they were asked in December to resign and shift over to the board of parent company, Mainzeal Group.

At that time, they said the construction company was meeting its obligations and had bank facilities in place.

But a few weeks later they found that promises of equity from Mainzeal Group's shareholder, Richina (NZ) LP, to the construction firm were "uncertain or conditional".

The directors of Richina (NZ) LP are Richard Yan and another director in Malaysia.

Although the parent company is not in receivership, the three directors said they felt they had to resign from that board also.

In a statement, they expressed sympathy for those affected.

"It is deeply disappointing that we were unable to secure the support that would have allowed Mainzeal to continue to operate."

A fourth director, Peter Gomm also resigned from the property and parent company boards, but remains Mainzeal's chief executive.

Hopes are now high that another big construction firm will be able to take over many projects which Mainzeal had underway.

Prime Minister John Key said it was likely the company would be sold, either in part or in full, if it is liquidated.

Regarding Mainzeal's Canterbury rebuild contracts, he said he would be "amazed if someone didn't come and either buy that bit of their business, my understanding is it was profitable."

Employees would likely find work elsewhere in the construction industry, but he expressed concern for the sub-contractors.

"I do have real concerns about the flow-on effects, that the small builder who does some contracting work for Mainzeal might be left out of pocket."

New Zealand First leader Winston Peters has waded into the matter saying the directors who resigned should explain their part in the company's liquidation.

MAINZEAL'S PROJECTS

- The $21 million Kapiti Coast Aquatic Centre.

- Mainzeal was awarded the contract to deliver the Campus Hub project at Victoria University, Wellington, which involves construction of a new central building, the refurbishment of the three surrounding buildings and the creation of a new outdoor area.

- Mainzeal is the civil subcontractor for Transpower's Pole 3 project, but has completed work at the Haywards and Benmore sites.

- BusinessDay.co.nz

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