Daniel Grollo hatches rescue plan for parts of Grocon empire

Daniel Grollo is looking at ways of resuscitating the collapsed parts of the Grocon empire, which went into administration last Friday owing $60m.

Daniel Grollo is working closely with advisers at Deloitte on readying a potential offer to creditors that would see their fortunes tied to Grocon’s action against the NSW government. Picture: Stuart McEvoy

Property scion Daniel Grollo is looking at ways of resuscitating the collapsed parts of the Grocon empire, which went into administration last Friday owing $60m.

The once dominant building company called in KordaMentha after a week of uncertainty about its future, leaving its subcontractors uncertain about being paid.

Grocon has made clear it will exit fixed-price building but has been preparing for operation as a slimmed down business focused on development and build-to-rent projects.

Mr Grollo is working closely with advisers at Deloitte on readying a potential offer to creditors that would see their fortunes tied to Grocon’s action against the NSW government over its treatment of the company at Central Barangaroo.

The company’s $270m legal action against Infrastructure NSW is not affected by the administration and received a boost last week when the NSW Supreme Court indicated that a key document detailing the development authority’s dealings with James Packer’s Crown Resorts and global giant Lendlease would likely be released.

While the case is slated to be heard next year the news would have come as a relief to Mr Grollo as it is critical to the case.

Grocon is thought to have spent the period ensuring that its ongoing operations in Melbourne’s inner city suburb of Collingwood and at Darling Harbour in Sydney – where it is building The Ribbon project – are not affected by administration.

The company is trying to limit the fallout at both projects, although the Melbourne project has been a flashpoint.

The complex administration of Grocon’s 39 building companies is likely to surpass last year’s administration of two of its Queensland and Victorian entities.

In that $28m collapse the main assets were related party loans whose recoverability was deemed uncertain. Loans among the 39 construction entities that Grocon has just put into administration could also be treated in this way once the administrators get a closer look at the books.

In the Queensland collapse creditors who were owed more than $28m backed a repayment deal by a Grocon parent entity that returned them between 7.9c to 10.6c in the dollar.

Grocon had called FTI Consulting into two subsidiaries in October 2019 as a legal dispute with listed landlord Dexus over $28m of lease payments owed after it developed a Brisbane tower escalated.

The dispute and separate Queensland fight with landlord GPT have since been settled.

That administration showed the hefty inter-company borrowings between different Grocon entities and a deed of company of arrangement saw these dropped and avoided triggering construction bonds affecting other jobs, including The Ribbon project.

Grocon may seek a similar solution for external creditors in the latest administration. A proposal could see creditors promised an initial sum plus a return contingent upon the outcome of either the NSW legal action or whether the government settled the claim in Grocon’s favour.

While this may involve an extended outcome it could offer a way forward for the company and its creditors.