Angry Grocon creditor APN Property Group demands more information about millions in loans to Grollo family

An angry creditor of collapsed construction group Grocon has demanded more information about millions of dollars in loans to the chief executive.

A key meeting to decide the fate of Grocon has been delayed after an aggrieved creditor demanded more information around tens of millions of dollars in loans by the collapsed construction group to its chief executive Daniel Grollo.

Excluding a complex web of intercompany loans, the group owes creditors about $100m.

Mr Grollo – the third generation in his family dynasty – is pinning his hopes to pay them back on winning a legal claim estimated to be at least $200m against the NSW government over sight lines at the Central Barangaroo project in Sydney.

Administrators KordaMentha said in its recently lodged 1567-page report that there were aspects of Grocon’s loans to Mr Grollo or companies owned by him and his ex-wife Katherine – which are outside the 88 entities under administration – that could “constitute a voidable, uncommercial and/or unreasonable director related transaction”.

They began in 2010 and were used for various purposes, including renovations to an apartment in the United States.

Grollo family properties include a 658sq m penthouse on the 80th floor of Eureka Towers in Melbourne. Picture: NCA NewsWire / Daniel Pockett

However, KordaMentha questioned the likelihood of recoverability under a liquidation scenario and has instead recommended entering into a deed of company arrangement (DOCA), saying it is in creditors’ best interests.

In a letter to the administrators last week, creditor APN Property Group demanded an adjournment to the second meeting of creditors of at least 45 days, calling for more transparency around the loans to Grollo family entities and more information about valuations for properties held by the now estranged couple.

It has also questioned the independence of the administrators to the Grollo family, which KordaMentha vehemently rejected in a letter of response.

“Your suggestion that the administrators have some kind of relationship with the Grollo family, such that our independence may be affected, is baseless and refuted in its entirety by the administrators,” administrator Craig Shepard said on the eve of Tuesday’s meeting.

APN has demanded more details on Grocon’s loans to Daniel and Katherine Grollo. Picture: Twitter/@KatGrollo

Mr Shepard instead used his discretion to adjourn for up to 10 business days, warning the delay and extra work would mean more costs.

Mr Grollo told creditors he had already provided more information than he was required to and would offer more, although it would probably not be enough to appease everyone.

Given the Easter break, the meeting will likely resume mid-April.

APN has even threatened legal action to set aside the proposed settlement if it is approved in its current form, under which a $10m upfront payment will pay outstanding employee entitlements and small creditors, while proceeds of the litigation against Infrastructure NSW, to be heard next year, will be used to pay back bigger creditors in full.

“The administrators do not consider it helpful or appropriate to threaten litigation in an attempt to influence us in the performance of our duties,” Mr Shepard said.

“The report prepared by us and the opinions and recommendations referred to therein are robust, accurate and properly reflect what we consider to be in the best interests of creditors, having regard to all the circumstances and our statutory obligations.”

Mr Grollo blames Grocon’s plight on the Central Barangaroo project in Sydney, alleging a secret deal between iNSW, Crown Resorts and rival Lendlease on building heights killed off his group’s plans to build smaller towers nearby. Picture: Nikki Short

But APN is pushing for a winding up, suggesting creditors can pursue Mr Grollo’s assets and seeking valuations for a 658sq m penthouse on the 80th floor of Eureka Towers in Melbourne, built by Grocon, which Katherine Grollo has made a claim over.

KordaMentha also noted in its epic report the collapsed companies had probably been insolvent since at least February 2019 when Grocon sought to find out if it was eligible for Safe Harbour provisions with respect of any insolvent trading claims.

The administrators said Mr Grollo would likely be able to rely on Safe Harbour laws, which are aimed at encouraging the pursuit of rescue plans, offering a protection if the director can show that the debts incurred while insolvent were part of a course of action that was reasonably likely to result in a better outcome than if an administrator or liquidator was appointed.

The group was founded as a concreting business by Mr Grollo’s grandfather Luigi in the 1940s.