Burmester Contracting Pty Limited (In Liquidation) ACN (Burmester) Statutory Report to Creditors

Transcription

1 Burmester Contracting Pty Limited (In Liquidation) ACN (Burmester) Statutory Report to Creditors Rob Kirman and Rob Brauer were appointed Voluntary Administrators of Burmester on 18 September At the second meeting of creditors held on 24 October 2017, it was resolved that Burmester be placed into liquidation, and Rob Kirman and Rob Brauer were appointed Liquidators. This report should be read in conjunction with the Administrators Report to Creditors dated 17 October 2017 (the Report), which includes background information of Burmester and the factors leading to its insolvency. The purpose of this report is to provide you with an update on the progress of the liquidation and advise you of the likelihood of a dividend being paid in the liquidation. 1. Update on the progress of the liquidation Since our appointment as Liquidators on 24 October 2017, the following tasks have been attended to: verifying employee entitlements and dealing with the Fair Entitlements Guarantee (FEG) in relation to the distribution of funds to former employees; realisation of all plant and equipment of Burmester via public auctions; furthering of debtor collections, including issuing demand letters to debtors, liaising with debtors and engaging Lavan Legal to proceed with recovery actions in relation to four remaining material debtors; facilitating repayment of the Administrators loan and payment of net proceeds from the sale of plant and equipment to the secured creditor of Burmester (ANZ Banking Group); and liaising with creditors and attending to statutory and administrative tasks. Report as to Affairs (RATA) A RATA, as at 2 October 2017, was prepared by the director, Garry Burmester and is summarised below, together with the Liquidators updated ERV in relation to Burmester s assets and liabilities: Summary of financial position $'000 Reference Director's RATA Assets ERV Low High Pre appointment debtors Inventory Work in progress Plant and equipment Total assets Liabilities ANZ (excluding contingent claim) (429) (429) (429) Employee entitlements (335) (494) (494) Related party loans (403) (403) (403) Statutory creditors (412) (571) (571) Trade creditors and third party loans (405) (443) (443) Total liabilities (1,983) (1,897) (1,897) Estimated surplus / (deficiency) before costs (1,165) (1,505) (1,425) Source: Director's RATA, Liquidators estimates Liquidators' ERV not able to separately disclose not able to separately disclose A BURMCON02-Liquidator Report - CLH MK 1

2 Trading/Business Sale Outcome As explained in the Report, on their appointment the Administrators implemented procedures to ensure the day-to-day running of Burmester continued whilst the Administrators sought urgent expressions of interest for the purchase of Burmester as a going concern and/or recapitalisation through a Deed of Company Arrangement. No interested parties came forward and ultimately Burmester ceased trading on 18 October 2017 after a short wind-down period in order to complete the current work in progress ( WIP ) that was commercial to finalise. All employees were made redundant on or before this date. Asset Realisation Assets of Burmester included debtors, WIP, motor vehicles and plant and equipment. The Liquidators engaged Gregsons to sell the assets via public auction, resulting in gross proceeds of $133,977 (GST exclusive), and net proceeds after costs of $107,717 (GST exclusive). Gross proceeds recovered equated to a small premium over and above auction realisable value. The remaining plant and equipment was purchased by an interested party at market value. Burmester s major asset was its debtor book with estimated recoverability of circa $340,000 at appointment. As at the date of the Report, circa $186,000 of the pre-appointment debtor book had been collected with further debtor recoveries estimated to total between $116,000 and $154,000. Since the Report, the Liquidators have collected a further circa $73,000, resulting in total collections of circa $260,000. Remaining debtors totalling circa $90,000 have been referred for legal action. The capacity to pay of these debtors, together with the reason for the current non-payment is unknown. Liabilities ANZ is the primary secured creditor of Burmester and lodged a proof of debt for circa $404,000. To date, ANZ has received $131,174 pursuant to its security over Burmester s plant and equipment. Burmester had 22 employees at the date of the Administrators appointment. Prior to Burmester being placed into Liquidation, all employees were made redundant. The Liquidators estimate of outstanding employee entitlements is summarised below: Annual leave - $84,451 Superannuation - $184,098 Unpaid wages - $49,955 Redundancy & PILN - $175,483 The Liquidators have been in communication with FEG to verify employee claims, and have completed the process. FEG has distributed funds towards 13 of the eligible employee claims (excluding unpaid superannuation) and has submitted a claim in the liquidation in relation to this priority distribution. Four of the employees are expected to receive a distribution from FEG by 31 January 2018 and the remainder of the employees are either ineligible for FEG assistance or are yet to submit their claim with FEG. Management accounts disclose trade creditors of circa $443,023 as at 18 September 2017, excluding (i) the ATO in relation to outstanding tax payments, and (ii) related party creditors. Proof of Debt forms received from unsecured trade creditors total $198,933 to date. A BURMCON02-Liquidator Report - CLH MK 2

3 Burmester has an outstanding taxation liability of circa $570,984 (excluding superannuation). This liability has increased from that disclosed in the Report as a result of the ATO finalising their Proof of Debt. Related party creditors of Burmester are recorded at circa $403,000, in accordance with management accounts. Investigations The investigations conducted to date indicate that: Burmester exhibited indicators of significant financial stress over the last 2 years prior to appointment, and is likely to have been insolvent (as defined by the Act) from at least July 2016; as a result of the above, the period over which an insolvent trading action and/or other insolvent transactions could potentially be pursued and recovered by a Liquidator is significant, albeit requires further detailed analysis to specifically quantify; the potential quantum of an insolvent trading claim is estimated at circa $364,000 (before realisation costs); a potential preference payment totalling circa $195,000 (before realisation costs) has been identified to the ATO. Notwithstanding, the potential defences available need to be further considered following receipt of information requested from the ATO in order to fully assess the merits and any recoverability of the claim; and the financial capacity of the Director to meet any claim from recovery actions is expected to be limited. It is understood the Director is in the process of selling property, all of which is subject to mortgages. The commerciality of pursuing any claim against the Director will be further assessed in due course. The Liquidators are in the process of furthering investigations in relation to the above. 2. Receipts and Payment to date Enclosed are details of all receipts and payments in the liquidation to date. 3. Likelihood of a dividend Based on information available to us at this time, and for the following reasons, we consider it unlikely that a dividend will be payable to creditors with admitted claims in the liquidation: gross realisations from the Burmester s non-circulating assets are insufficient to repay the exposure to ANZ; debtor recoveries are proving difficult and total recoveries will likely be less than initially forecast on the basis that, (i) debtors are in some instances raising workmanship and counterclaim issues, and (ii) costs to pursue and recover recalcitrant debtors will impact overall net proceeds flowing to the liquidation; priority employee claims are unlikely to receive a dividend absent recoveries from potential Liquidators recovery actions. FEG has distributed funds towards the priority employee claims (excluding unpaid superannuation); and unsecured creditors are unlikely to receive a dividend in liquidation, absent material recoveries from potential Liquidators recovery actions (including insolvent trading, which is dependent on the Director s ability to meet any such claim). If a dividend is going to be paid, you will be contacted before that happens and, if you have not already done so, you will be asked to lodge a proof of debt. This formalises the record of your claim in the liquidation and is used to determine all claims against Burmester. 4. Cost of the liquidation Our remuneration for the period of the liquidation was approved by creditors at the meeting held on 24 October A BURMCON02-Liquidator Report - CLH MK 3

4 In accordance with our Remuneration Report dated 17 October 2017, our estimated total remuneration for the liquidation is $90,000 (excl. GST). 5. What happens next? We will proceed with the liquidation, which will include: finalising communications with FEG; reporting outstanding superannuation obligations to the Australian Taxation Office; pursuing remaining debtors; completing our investigations into Burmester s affairs; pursuing any viable claims for statutory recovery actions; holding meetings of creditors (as required); reviewing creditor claims and distributing a dividend (funds permitting); attending to statutory and administrative tasks; and completing reporting obligations to the corporate insolvency regulator, the Australian Securities and Investments Commission (ASIC). If we receive a request for a meeting that complies with the guidelines set out in the initial information provided to you, we will hold a meeting of creditors. We may also write to you again with further information on the progress of the liquidation in due course. We expect to have completed this liquidation within 12 months. 6. Where can you get more information? You can access information, which may assist you on the following websites: ARITA at ASIC at (search for insolvency information sheets ). If you have any queries, please contact Cecelia Lark Hare on (08) Dated: 24 January 2018 Rob Kirman Liquidator Enclosures: List of receipts and payments Proof of Debt (Form 535) Proof of Debt Guidance Notes ARITA Information Sheet Offences, Recoverable Transactions & Insolvent Trading A BURMCON02-Liquidator Report - CLH MK 4

5 Burmester Contracting Pty Limited (In Liquidation) - Receipts and payments Receipts $ Asset sales 174,875 Transfer from Voluntary Administration 157,333 Debtors 87,004 Total Receipts 419,212 Payments Secured creditor payment (126,559) Appointee fees (99,000) Appointment funding repayment (70,000) Asset realisation costs (38,453) Legal fees (13,062) Insurance (11,423) Superannuation (9,666) Rent (5,335) Trading supplies and utility expenses (4,753) Lease contracts (4,616) Other expenses (1,210) Appointee disbursements (583) Total Payments (384,659) Net Receipts/(Payments) 34,553 A BURMCON02-Liquidator Report - CLH MK 5