PBS building administrators issue creditor report - June 2023

Administrators in control of major construction firm PBS Building have issued a report to creditors following a 16-week asset recovery program and investigations into the financial affairs of the five companies.   

RSM Australia Partners Jonathon Colbran, Richard Stone and Mitchell Herrett were appointed Voluntary Administrators of five PBS companies operating in the ACT, NSW and Queensland on 7 March 2023. At the time, 24 PBS Building projects worth $439 million were under construction. Details of the projects are listed in the creditor’s report. 

The 200+ page report – which has been lodged with the Australian Securities and Investments Commission (ASIC) – contains preliminary findings from the Administrators’ investigations and recommendations regarding next steps and timeframes. 

The report also provides creditors with a summary of the history of the companies, the actions and efforts of the Directors to turnaround operations, and a preliminary assessment of the conduct of the parties and future options for the companies. 

Update on the affairs of the PBS companies

Company assets: assets with a book value of more than $50 million have been identified, but a final realisable value will only be determined upon the completion of asset sales and complex debtor recovery efforts being undertaken by the Administrators.  

Payment claims: more than $6.8 million worth of construction contract payments owed to PBS companies have been identified and are being actively pursued under state-based Security of Payment Acts (SOPA), for the ultimate benefit of creditors. A further $1.3 million worth of claims are also being considered.   

Creditor claims: more than 500 creditor claims have been received to date. These potential creditor claims, combined with those already listed in the company books, are currently estimated to be $169 million, which includes $55 million for trade creditors. However, all claims are yet to be verified and in a number of cases comprise upper-limit estimates. Therefore, the total final value of claims made to date could be $50+ million less based on already identified examples of overlapping claims and claims that are likely to be materially reduced by a number of factors, including payments from Project Trust Accounts that will flow to creditors in due course.  The Administrators will complete a detailed creditor claim assessment process before any dividend is paid. 

Projects: contracts with Principals on 22 of the 24 active building projects have ended, in many cases with the assistance of the Administrators, enabling Principals to recommence construction. Works have recommenced on at least seven (7) project sites, which is expected to result in Project Principals paying more than $7.8 million to a significant number of sub-contractors and creditors, some of whom have already been paid. This not only benefits the affected creditors, but also indirectly benefits all creditors when the total value of claims is reduced by these payment amounts. 

Sub-contractors/employees: a material number of former employees who were made redundant and sub-contractors who were creditors of the PBS companies have been re-employed and re-engaged by Principals and or the new contracted building companies. 

Project Trust Accounts: while the Administrators are of the preliminary view the Project and Retention Trust Accounts in NSW and Queensland have been properly maintained by the companies, they have sought directions from the Queensland Supreme Court on the administration of the Queensland Trust accounts given there is no precedent for administering these accounts in an external administration. The matter is due to be heard on 29 June 2023. More than $4 million is held in Project Trust Accounts relating to projects undertaken in NSW and Queensland. 

Next steps

Creditor meeting

Mr Colbran said the Administrators would hold a face-to-face creditor’s meeting in Canberra on 5 July where they propose to exercise their statutory power to adjourn the meeting after discussing the report with creditors, the status of the administrations, and answering creditors’ questions.

“The Administrators are proposing to adjourn the creditor’s meeting for up to 45 business days, meaning a decision about the future of the companies was unlikely to be determined until on or around 6 September 2023,’’ he said. Mr Colbran said the additional time would enable the Administrators to pursue outstanding contract payments owed to PBS companies. 

“The additional time will enable more than $6.8 million worth of identified SOPA construction contract payment claims that have already been issued, to be pursued, adjudicated out-of-court, and determinations issued. The additional time will also allow a further $1.3 million worth of SOPA claims to be explored and potentially pursued,” he said. 

“To date more than $4.5 million of the identified SOPA claims have already been determined in PBS’ favour. These SOPA claims have the potential to produce significant recoveries for the companies – and ultimately creditors – at a cost that is far less, and in a manner that is far more efficient, than if these claims were pursued through the courts. A company that is in liquidation cannot pursue such claims under these Acts.’’ 

Mr Colbran said PBS’ current and former Company Directors, senior management and staff continued to engage proactively with the Administrators providing regular assistance to support the recommencement of projects and the recovery of assets for the benefit of creditors. 

“From our preliminary analysis of the companies’ records, we can see that the PBS Building Directors took a number of steps to try and navigate through the challenges they were facing, including implementing a three-phase turnaround plan. However, our preliminary assessment is that the companies ultimately became insolvent on or before 10 February 2023 as a consequence of a number of factors including being unable to secure the necessary level of additional working capital and additional support."

If the creditor meeting is adjourned as recommended, a further report to creditors will be prepared and another meeting will be held on or before 6 September 2023 where creditors will decide the future of the companies.   
 

FOR MORE INFORMATION

Creditors affected by the administration of the PBS construction companies should contact RSM via email at [email protected] or at (02) 6217 0228.