Revolution Roofing sale approved after creditor dispute

The Federal Court has approved the sale of Revolution Roofing by receivers following a dispute between creditors over claims to funds raised from the sale.

The Federal Court has approved the sale of Revolution Roofing by receivers following a dispute between secured creditors over claims to funds raised from the sale.

Conditional approval by the court paves the way to completion of the long-delayed sale of the business, which fell into receivership on December 23.

Receivers from Grant Thornton announced the sale to Victorian company Design Group in February, but the deal has been caught up in a dispute between secured creditors over the order of priority of debts.

Those creditors include several companies associated with Revolution Roofing founder John Easling, who had earlier proposed a deed of company arrangement proposal aimed at wrestling back control of the steel roll-forming company he established in 2009.

In his judgment handed down on May 19, Justice Ian Jackman approved the sale ahead of a final determination over the order of priority of secured debts.

“I am satisfied that the asset sale, pursuant to the asset sale deed, is in the best interests of Revroof’s creditors and, in circumstances where it is necessary that relief pursuant to s 420B of the (Corporations) Act be granted in order for that sale to complete, it follows that relief is also in the best interests of creditors,” he said.

Revolution Roofing founder John Easling. Picture: MATT LOXTON

“It also follows that the sale and disposal of the property under that order will not unreasonably prejudice any creditors. On the contrary, the orders proposed by the receivers contemplate that the net sale proceeds be held in trust, pending determination of the priorities dispute and claims made to them.”

Administrators were appointed to Revolution Roofing on December 6 amid soaring steel prices and ongoing supply chain issues.

Receivers were later appointed to take control of the company’s affairs by ASX-listed finance company and secured creditor Earlypay in a bid to recover close to $29m owed to it.

At a meeting of creditors last month, administrators delayed a final vote on the future of Revolution Roofing, to give receivers more time to finalise their sale of company.

However at that meeting creditor and prominent South Australian businessman Stephen Young questioned administrator, Glenn Franklin of PKF, over whether he had acted in the best interests of creditors when choosing not to support the DOCA proposal put forward by Mr Easling.

“I do not believe that you have been engaged in trying to get the DOCA proposal to a point where it can be accepted,” Mr Young said.

“In my view, you have been influenced by Earlypay and, in my view, you have been influenced by your desire to meet your personal commitments to pay the debts.

“As such, you find yourself in a compromised position.”

Mr Easling had been seeking the support of “special situations” investment firm Arbitrium Capital Partners to back his DOCA proposal, which involved a plan to contribute $19m towards the repayment of creditors.

Earlypay chief executive James Beeson told The Australian the company had been open to a “sensible restructuring solution”, but Mr Easling’s DOCA proposal failed to deliver that.

“Unfortunately the DOCA proposed on behalf of Mr Easling was inferior to the sale,” he said.

Justice Jackman’s judgment will enable receivers to pay out an initial $5.5m from the sale proceeds, to secured creditors who had already released their securities over company assets and were not party to the Federal Court dispute.

Earlypay will receive $3.8m while lender NAB will receive $1.5m.

The balance of the proceeds from the sale of the business will be held in a trust account pending the determination of priority claims from secured creditors plus any claim by administrators.

The $88m collapse of Revolution Roofing and sister company Nexteel was the largest corporate insolvency in South Australia since the collapse of York Civil in 2018.

The sale to Design Group is expected to secure the jobs of about 170 workers, mostly in South Australia.

As part of the deal Design Group will acquire the Nexteel brand but its operations have been shut down leading to the loss of close to 20 staff, mostly in Newcastle, NSW.

Originally published as Revolution Roofing sale approved after creditor dispute