Clough was struggling to pay its subcontractors as far back as February
Problems with payments first started in February at Clough, raising questions over the company’s collapse into administration.
Failed contractor Clough was in financial trouble and struggling to pay subcontractors on time as far back as February, nine months before the company collapsed into voluntary administration.
The Australian has spoken with multiple subcontractors who say the company was juggling payments to subbies around major milestone payments from project owners from early this year.
Clough’s administrator Deloitte is now engaged in a scramble to find trade buyers or fresh cash to keep the company’s projects running. Sources say NRW chief financial officer Richard Simons – who was Clough’s finance boss until August – was seen in the company’s offices on Tuesday.
The Australian understands Italy’s Webuild has also returned to the fray, and the company is said to be considering picking out select individual contracts in the fire sale of Clough’s assets and operations.
One project under construction, the Waitsia gas development in Western Australia, received a financial lifeline after owners Mitsui E&P and Beach Energy stepped in to reassure workers and contractors they would be paid for their work on site.
“We are committed to ensuring workers and contractors on the project will be paid. We hope that this provides a great level of confidence for the team. Work can continue, bills will be paid and wages will be paid,” Mitsui E&P Australia chief executive Ken Yamamura said.
Mitsui stepped in after sources told The Australian that multiple subcontractors had threatened to walk off the job, worried they would not receive money owed for work on the facility.
Webuild’s decision to walk away from a deal to buy Clough outright triggered the contractor’s collapse this week.
But email exchanges, seen by The Australian, suggest Clough was already nearing a crisis point by April and May. That was around the time that The Australian first reported the company was looking to restructure its finances and find new lenders to smooth over its troubles.
At the time of the report, chief executive Peter Bennett told staff the company was in an “enviable position, with a strong order book, debt-free balance sheet, a diverse global business, and excellent prospects for winning new, high-profile and exciting work”.
But only a few weeks later a finance manager told senior staff no payments would be made to increasingly fractious subbies until Clough received a $10.5m loan from another business owned by South African parent Murray & Roberts, Cementation Canada, and the release of $20m worth of term deposits associated with its troubled US chemicals plant job.
In May one small subcontractor to Clough at Mitsui and Beach Energy’s Waitsia project, frustrated by multiple failures by Clough to make monthly payments worth more than $1m – a business-threatening sum to a family-owned business – threatened to withdraw further work if future payments were late.
Sources say that, so bad were the late payments at Waitsia, Mitsui demanded a written assurance from Mr Bennett and Clough’s chief financial officer that future milestone payments would flow straight through to subbies.
In one email, seen by The Australian, a Clough manager privately expresses frustration at the company’s failure to pay its bills and recommends a subcontractor contact the project owner to complain about the latest late payment in the hope it would lead to speedier payments in future.
In multiple emails, Clough staff refer to “short term” cashflow issues, and express frustration that subcontractors have been chasing late payments after receiving no joy from the company’s finance staff.
Sources say that, from early this year, Clough contract managers were instructed to select the most urgent and important invoices to pay – and the rest to sit in limbo until more cash became available. Accounting staff told subcontractors who complained, that Clough was waiting on milestone payments, due imminently, and would clear the backlog when the money arrived.
The key sticking point now both for Webuild and other contractors in the sector to strike a deal for Clough remains the giant cash needs of the company, which employs 2500 people and was founded in 1919 by brothers Jack and Bill Clough.
A $200m-$300m injection was required to keep the company liquid and operating over the next six months compared with Webuild’s pledge for a $30m interim lending facility to allow the company to cover payments to trade creditors, should the deal have been completed.
New accounts this week show Clough borrowed more than $167m from Webuild as its financial woes on the Snowy 2.0 contract deepened. The company slumped to a $375.3m loss and a $304m working capital deficit for the 12 months to June 30.