Deloitte poised to be appointed for Probuild voluntary administration

Insolvency expert Deloitte is understood to have been tapped for the voluntary administration of Probuild. Picture: Zak Simmonds

Insolvency expert Deloitte was expected to be tapped for the voluntary administration of Probuild on Wednesday.

Sources told DataRoom that an appointment was to be made as early as Wednesday night and no doubt other advisers in the insolvency world will be hovering in what is one of the largest jobs in the distress space to emerge since the start of the global pandemic.

It comes after speculation in the market that the well-known construction company with more than 500 workers has racked up losses worth close to $300m over time.

This is as its infrastructure arm has struggled and as it has faced serious delays at a major Brisbane construction job, a 47-storey residential waterfront tower at 443 Queen Street.

Unlike what was initially expected, members of the insolvency community have had few big jobs to sink their teeth into since the start of the pandemic - other than Virgin Australia - as the governments pumped stimulus into the economy and interest rates reached rock bottom levels.

But there is set to be more work on its way, with some suspecting that insolvencies will emerge in the hospitality and retail space after reporting season and after construction groups priced jobs years ago and costs have since blown out.

The higher costs are due to shipping delays and staff shortages, leaving players in the tight margin industry unable to make ends meet.

Probuild’s troubles have been brewing for a while and some were suggesting that Deloitte has been working with the company already, in a situation that could see another rival appointed to appease investors down the track for the voluntary administration role.

Probuild made efforts to find a buyer in the past through Investec and even netted China State Construction Engineering as an acquirer in 2020, but the transaction was rejected by the Foreign Investment Review Board.

The company is owned by South Africa’s WBHO and had been on the look out for a buyer for years.

Last week, speculation surfaced that a construction or civil engineering business on Australia’s east coast could soon be coming up for sale, yet advisers find sourcing buyers for companies in the industry an extremely tough ask.

The operation is understood to have an average annual turnover over time of about $2bn, and the sale of the business about two years ago was for the construction arm only.

Challenges with the infrastructure business prompted WBHO to look for an exit from the Australian market.

Among Probuild’s projects have been the Perth’s Ritz Carlton, Chadstone shopping centre in Melbourne, the Ribbon building in Sydney’s Darling Harbour, Greenland Centre and Sydney’s World Square.

The Australian reported earlier on Wednesday that tradesmen had been told to stop work on the troubled high rise residential project in Brisbane amid concerns that the company was on the verge of collapse ahead of DataRoom first revealing on Wednesday that Deloitte was set to be mandated.

Deloitte’s imminent appointment comes after it also advised high profile construction company Grocon ahead of its collapse in 2020.

KordaMentha was appointed voluntary administrator.

Probuild’s challenges come as further distress is expected to emerge across the construction market on the back of cost blowouts linked to inflationary pressures.

WBHO purchased Probuild around 2001 as part of its efforts to gain a foot hold in the Australian civil engineering market and in its heyday, it was a major competitor to the Western Australia builder Multiplex, now owned by Brookfield.

Sources say tensions have always existed about bringing the civil and construction businesses together.

The business was previously run by Simon Gray, a former Multiplex executive, who moved to the position of executive chairman in 2019.

Mr Gray founded a company called that was purchased by Probuild under WBHO’s ownership.