SA Structural’s insolvent trading revealed in creditors report

SA Structural may have been trading insolvent for more than two years before its collapse, administrators say, while a list of creditors has been revealed.

Crane hire companies are the big losers in the failure of steel fabrication company SA Structural, which may have been trading insolvent for more than two years before its collapse, according to the company’s administrator.

In a report to creditors ahead of a second creditors meeting next week, administrator Andre Strazdins from BRI Ferrier outlines how the company’s financial position slumped during the 2019 financial year, with losses reaching $7.1m and $8.5m in 2020.

Poor cost estimates, project mismanagement and a costly expansion have been blamed for the company’s demise, which has left unsecured creditors chasing an estimated $45.4m in unpaid debts.

The administrator’s report, lodged with ASIC on Thursday, details for the first time the amounts owed to individual creditors.

Melbourne business finance group Fifo Capital is owed $1.6m while a series of local and interstate crane hire companies are among those left most out of pocket.

Wingfield-based Fleurieu Cranes is chasing close to $600,000, while Mount Gambier’s Williams Crane Hire has put in a claim for close to $130,000.

Interstate companies including Advanced Cranes & Rigging, Big Hill Cranes, I&Z Cranes & Rigging, and Rex Constructions are owed a total of close to $1.2m.

Williams Crane Hire owner Josh Williams said his company was never paid for supplying cranes and riggers to SA Structural as part of the $90m upgrade of the Tarpeena sawmill in the state’s south-east.

Williams Crane Hire owner Josh Williams says he was left chasing $130,000 from SA Structural after supplying cranes and riggers for the upgrade of the Tarpeena sawmill, pictured. Picture: Timberlink

“We were probably chasing the money for four or five months,” Mr Williams said.

“It has a massive impact on the business - there would have been growth within the business this year but none of that will happen now, and I have to up my overdraft to pay the bills.”

In his report, Mr Strazdins says financial pressures at SA Structural were appearing as early as 2018, when the company started amassing significant trading losses, stopped paying regular superannuation payments to staff, failed to pay creditors within normal trading terms and entered special arrangements with certain creditors.

“The combination of the above factors indicates to me that the company may have in fact been insolvent from as early as 1 July 2018,” the report says.

“It is clear ... from some time commencing after 1 July 2017, the company began to experience a significant decline in working capital and hence had no option but to seek finance from other sources to enable it to continue to trade.

“The company’s borrowings increased by almost 100 per cent during the 2019 financial year. This is a result of the company requiring finance from alternative sources due to a significant working capital deficiency.”

Receivers and managers Deloitte permanently closed down SA Structural on February 1, after being engaged by secured creditor NAB to recoup around $13m owed to the bank.

It left close to 200 workers without a job, and brought to an end hopes the firm would complete work on around 15 unfinished projects.

In his report Mr Strazdins said the move could prove costly.

“A ramification of not completing the contracts is that the company may now face significant liquidated damages claims from their former clients,” the report says.

“Several clients have already lodged claims for liquidated damages, and I anticipate there will be further claims in this regard.”

Treasurer Rob Lucas said liquidated damages had not yet been sought for unfinished government projects including the upgrades of Glenunga International High School and Playford International College, and the Gawler rail line electrification project.

“We haven’t ruled anything out but we would need to seek legal advice around the likelihood of those claims being successful,” he said.

“Our main priority is to deliver the projects as close to being on time as we can.”

Mr Lucas said another steel supplier had been secured for phase 2 of the Repat Reactivation project, while negotiations were ongoing for a replacement supplier for the Gawler rail line project.

SA Structural had been working on the Glenunga International High School upgrade, pictured, before its collapse. Picture: Brenton Edwards

Deloitte has shortlisted groups interested in acquiring SA Structural’s assets while Mr Strazdins is recommending that creditors vote to appoint a liquidator to wind up the company at a second creditors meeting on February 25.

Major creditors include the company’s landlord, Centuria, which is claiming $18.6m for future rent payable under a 10-year lease, while the ATO has put in a claim for $4.4m in unpaid taxes.

Under the Corporations Act, a director can be held personally liable for debts incurred by the company while it’s deemed to be insolvent.

Michael Mangos, who established SA Structural in 2003, was the sole director at the time administrators were appointed, while former director former director Steve Aliferis also presided over the company from July 2019 to July 2020.

Mr Strazdins has been contacted for comment.

SA Structural’s landlord is claiming $18.6m for lost rent at the company’s former premises in Edinburgh.