23 Dec 2016

Diploma Construction & some associated entities go bust—How Worrells can help


4 min

The Western Australia business and public communities have been affected by the news that the Diploma Construction ‘enterprise’ have appointed external administrators, Grant Thornton, and Ferrier Hodgson to select entities under the ‘Diploma Construction enterprise’ as receivers and managers, and administrators.

As a large scale business enterprise that employs many staff and has contracts with a multitude of external businesses to support and underpin its operations, the fallout is yet to be realised.

Worrells are not appointed in any capacity to the above company or associated entities.

Worrells, however, advocate that businesses that have agreements in place with the company/businesses, and assets under lease or security, should obtain independent advice promptly. While the season break allows some pressure alleviated from associated trade, under the various insolvency appointments, the critical meeting dates are looming, with the first creditors meeting held for the voluntary administration appointment is 5 January 2017.

Mervyn Kitay, a registered and official liquidator, is a Worrells Partner on the ground at the Perth Office, invites affected creditors—businesses or individuals—to call or meet with him to get guidance on what the appointments mean to debt they’re owed by Diploma. Critically, he urges that directors consider their position now that (potentially) their own business could be at risk of ‘trading while insolvent’.

Mr Kitay says, “The impact of the collapse on the suppliers and sub-contractors of entities of the Diploma Group is likely to be severe, and comes on top of very difficult trading conditions over the past 12 months, particularly in the building and construction sector. There has been a general trend, to extend the repayment terms to suppliers in the building and construction industry to in some cases to 90 days—and this means that the cash flow of many suppliers is already at breaking point.

Kitay says that “It remains to be seen whether suppliers and sub contractors will be paid any monies owing to them, but what is absolutely  certain  Mr Kitay says, is that any dividend to be paid by the administrators will be quite a way off, at best”.

Kitay believes that the impact of the potential bad debts for Diploma suppliers and sub contractors needs to be factored into their cash flows with immediate effect so a  worst case scenario  can be contemplated, and allow for early intervention.

Kitay has devised a checklist that helps creditors assess which category they fit into—minimal impact, moderate impact, and critical impact—and the solutions that Worrells can offer to help them in this time of stress.

Go to their checklist here.

Worrells offer confidential and complimentary consultations for insolvency, restructuring, and turnaround matters.

While the Worrells Perth office officially closes at close of business, Friday 23 December and reopens on 3 January, Mervyn is contactable during this difficult period.

Worrells is a major contender in the insolvency and forensic investigation market. It prides itself on having local offices to respond to local issues. Worrells provide a personalised and transparent services with 24 partners and 24 offices across Qld, NSW, ACT, Vic, SA and WA, it draws upon broader resources and technical expertise.

– ENDS –

Interviews/consultations available:
Mervyn Kitay
Partner, Worrells Perth
08 9460 1046
0418 947 957

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