Daniel Grollo’s clean break from collapsed construction arm Grocon under threat

Creditors have demanded an independent review into Daniel Grollo’s Grocon dealings, ahead of a critical meeting where they’ll vote on their settlement agreement.

Daniel Grollo with wife, Kat.

Daniel Grollo’s chances of cleanly walking away from his legacy Grocon business have been dealt a blow with a key creditor threatening legal action against his proposed settlement.

APN Property Group has called for an independent review of Mr Grollo’s settlement offer to Grocon creditors, saying more information around millions of dollars in lending made by Grocon to Mr Grollo or companies owned by him and his former wife, Kat, is needed.

The Melbourne-based boutique property investor has also questioned the independence of administrator KordaMentha and threatened to launch legal action to set aside a proposed settlement if it is approved in its current form.

KordaMentha has recommended creditors accept the settlement drafted by Mr Grollo.

APN wants KordaMentha to give creditors more time to work through a near 1600-page creditors report ahead of a critical meeting where they will vote on whether to accept Mr Grollo’s settlement or liquidate Grocon’s legacy construction arm.

APN sent a detailed letter to KordaMentha outlining its concerns on Friday.

The fund is chaired by former Grocon managing director Chris Aylward and, in a twist, counts Bruno Grollo – Daniel’s father – as an investor.

In its letter, APN director Tim Slattery calls on KordaMentha to provide creditors with an extra 45 days to review Mr Gollo’s proposed settlement – outlined in a Deed of Company Arrangement – which has been recommended by the administrator.

Creditors, who are owed about $100m, are due to vote on it on Tuesday.

“It is impossible, given the report’s volume and content, for any of the creditors to properly review, consider and assess the report in the limited time available to them before the second meeting,” Mr Slattery says in the letter.

“It is especially unreasonable and impossible, in the limited time we have been given, to work through the myriad of intercompany loans and transactions in order to assess whether creditors will, in fact, be better off accepting a Deed of Company Arrangement (DOCA) instead of liquidation.”

More dramatically, APN says it is “concerned” about KordaMentha’s “relationship with the Grollo family and what bearing that has had on the material provided” to creditors.

“In our view, it would also be prudent and in the interests of creditors for a second independent administrator to be appointed to review the report and the terms of the proposed DOCA,” Mr Slattery writes.

“It appears that if the proposed DOCA is approved it will be inevitable that an application will be made to set it aside. The result will be a quagmire of litigation.”

APN says creditors need further information around Mr Grollo’s US property assets, as well as millions of dollars in lending made to Mr Grollo or companies owned by him and his former wife, Kat.

It also wants legal opinion provided on Mr Grollo’s chances of winning a $270m damages claims against the NSW government.

Large creditors will only be paid in full if Grocon wins that case.

Mr Grollo has proposed to tip in $10m and sell his level 80 Eureka Tower penthouse in order to payback creditors.

While that will cover employees and small creditors, larger ones such as APN risk getting back just 3c on the dollar.

APN says Mr Grollo’s settlement appears to be designed to buy the votes of small creditors to the detriment of larger ones.

But it has been backed by KordaMentha given the uncertainty, expensive and time associated with a liquidation.

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