Directors of Clough subsidiaries sought safe harbour protection against insolvency
Directors of subsidiaries of collapsed contractor Clough sought safe harbour protection from claims against insolvency as early as May 2022.
Directors of subsidiaries of collapsed contractor Clough sought safe harbour protection from claims against insolvency as early as May 2022, with the company’s administrators this week saying the group had “indicators of insolvency” from as early as July.
Deloitte administrators Jason Tracy and Sal Algeri published their second report to creditors on Wednesday, concluding that Clough was likely insolvent from October, when the company’s directors concluded that its sale to Italy’s Webuild was the best option to save the company.
But, with investigations ongoing, Deloitte said the company could have been insolvent by June 30, and perhaps earlier given directors of the company’s subsidiaries say they invoked so-called “safe harbour” provisions of the corporations act – which protect directors from claims of insolvent trading if they are seeking to restructure or refinance a company – in May 2022.
The report showed that Clough – led by Peter Bennett – had $2m owing in invoices from external creditors – including subcontractors and suppliers older than 90 days at the end of June 2021. That ballooned to $46.4m a year later.
Mr Tracy and Mr Algeri sealed a deal last week to sell the bulk of Clough’s contracts to Webuild for $35.9m, securing the jobs of about 1100 workers and ensuring the venerable contracting company will not be liquidated.
But the report to creditors, circulated ahead of the February 15 meeting to approve the Webuild buyout, suggests Clough was in trouble many months before the collapse of the first Webuild deal forced its board to put the company into administration.
While Clough’s revenue grew from $686.3m in the 2019 financial year to $1.47bn in 2022, its costs trebled from $684.2m to $1.84bn in the same period.
Deloitte attributed the company’s problems to a sharp increase in raw material costs, the fact it could not settle some outstanding claims against its clients, and the failure of its parent company – South Africa’s Murray & Roberts – to repay $347m it owed the company from a loan taken from Clough in 2013 to take control of the contractor.
The report also shows the company facing significant claims from Webuild for work on its Snowy Hydro 2.0 joint venture. Webuild issued three formal letters of demand to Clough for its share of Snowy costs in June, August and September, with the final tally topping $29m.
Under the deal with Webuild, the Italian construction giant will take charge of the bulk of the contract work and liabilities – including staff entitlements – for five companies within the group. Seven group companies will remain in administration.
Deloitte estimates that unsecured creditors will receive about 13.2c in the dollar if the Webuild deal is approved.
Clough’s administrators said they had identified about $17.2m of claims for insolvent trading as part of their investigations, but noted that recovery of the cash was uncertain.
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