Grollo rescue bid buys time for Grocon

Daniel Grollo’s 11th hour sweetener to Grocon creditors has pushed out a key vote on the future of the construction giant for another month.

Executive chairman and CEO of Grocon, Daniel Grollo heads to his lawyers office in Melbourne on Thursday. Picture: Aaron Francis/The Australian

Daniel Grollo’s eleventh hour sweetener to Grocon creditors has pushed out a key vote on the future of the construction giant for another month.

Mr Grollo offered to bolster the Grocon rescue deal he proposed in March that would have seen him tip in $10m on top of company assets as part of an offer to bring the property construction major out of administration.

KordaMentha administrators told a creditors meeting on Thursday they had received the letter from Mr Grollo’s legal team proposing the deed of company arrangement initially tabled in March be amended. Thursday’s meeting was set to decide whether control of the company would return to Mr Grollo or if the company was to be liquidated.

The letter, from King Wood Malleson, proposed a delay to allow the Deed of Company Arrangement be amended “for the benefit of creditors”. Details of the improved offer were not disclosed.

Some creditors suggested to The Australian the last minute move that saw the creditor’s meeting adjourned for 35 days was a recognition on Grollo’s half that his earlier rescue plan was set to be voted down.

At the same time delay buys Mr Grollo time in Grocon’s high-profile $270m court battle with the Barangaroo Delivery Authority.

Heading into the meeting Mr Grollo had offered a group of former Grocon employees and small creditors paid out in full via a $10m payment.

But many creditors, including subcontractors, will receive between 3 cents and 100 cents in the dollar of debts they are owed.

The battle of the fate of 88 Grocon entities, representing much of the Grocon group, has seen several fractious rounds of back and forth between Mr Grollo and creditors.

Grocon creditor’s are mostly split between the Australian Taxation Office, APN Property Network, Impact Investment Group, and ISPT who are between them are believed to be owed in excess of $106m.

ISPT is believed the largest of the creditors, owned in excess of $35m, followed by Impact which is owed $28m.

APN is owed $25m, while the tax office is owed $15m.

The Australian Taxation Office has largely sat out proceedings, but voiced its vote in the last creditors’ meeting to support a push by APN for a 10 day adjournment.

An APN spokesman said the move to delay proceedings by 35 days “vindicates” its position that the proposed deed of company arrangement was “manifestly inadequate both in terms of the quantum offered to creditors and the level of information provided in support”.

“APN’s position remains that transparency is essential to considering whether a proposed deed of company arrangement versus liquidation is a better result for creditors, who are owed tens of millions of dollars and are still in the dark on the web of related party transactions and a very opaque picture on Daniel Grollo’s true net worth,” the APN spokesman said.

Grocon’s most strident critics APN had been pushing for further delays before Thursday’s meeting, calling for a further adjournment in a bid to get access to more information on loan agreements between Grocon and Mr Grollo’s build to rent businesses.

APN had attempted during the previous 10 day adjournment to gain access to documents spelling out the detail of loan agreements made between Grocon Funds Management, the corporate entity which sits behind Mr Grollo’s most recent build-to-rent property play, and the Twenty Twenty2 trust.

But KordaMentha had knocked APN back, citing 10 days as insufficient time to supply the documents.

“APN is also considering its position in relation to the independence of KordaMentha.

During today’s meeting our representative raised his hand to speak and was muted as he began to speak.”

“KordaMentha did not afford any creditor a chance to discuss any issues or ask any questions about the adjournment.”

APN has noted one $5.5m loan to the build-to-rent business was only provided in June 2020, mere months before parts of Grocon would slip into administration, and was used to provide equity for an investment with Singapore’s GIC in a build to rent venture.

Mr Grollo is currently engaged in six build-to-rent projects with GIC across sites in Sydney and Melbourne and APN estimates the joint venture has $500m of equity at its disposal.

A spokeswoman for Mr Grollo declined to comment.

APN said it had wanted to seek the release for $10m committed by Mr Grollo under the proposed deed of company arrangement to pay employees and creditors.

“APN is representing small investors at the end of the day and does not wish to see the conduct of Daniel Grollo do any further harm to creditors, particularly small creditors who may not have the same bargaining power,” the APN spokesman said.

Originally published as Grollo rescue bid buys time for Grocon