Grocon creditor lashes Daniel Grollo’s rescue plan

Daniel Grollo’s plans for a quick-fire rescue plan for his collapsed Grocon empire have been dealt a blow, as a creditor criticised the scheme.

Daniel Grollo the former boss of Grocon. Picture: Stuart McEvoy for The Australian.

Property scion Daniel Grollo’s plans for a quick-fire rescue plan for his collapsed Grocon empire have been dealt a blow as a major creditor criticised the scheme and called for more time to weigh it up in a stern letter to the company’s administrators.

Mr Grollo has put up a deed that would see him tip $10m into a pot which would pay out staff and small creditors but could leave firms owed larger sums or embroiled in legal actions against Grocon waiting years for the company‘s case against the NSW government to be resolved.

The plan has come under fire as KordaMentha‘s 1567 page report revealed extensive loans to Mr Grollo and his associated companies that amount to about $91m and a deed that would leave him in control of a substantial build-to-rent business developing thousands of apartments.

Mr Grollo is pitching the plan as being the best option for all creditors, with a litigation funder secured for Grocon‘s $270m legal action against the NSW government over property dealings at Sydney’s harbourside Barangaroo that the company says favoured James Packer’s Crown Resorts and developer Lendlease, that could pay out remaining creditors in future.

But APN Property Group, a Melbourne property player in dispute with Grocon and Mr Grollo, has slammed plans for a creditors meeting on Tuesday, writing to KordaMentha administrators Craig Shepard, Andrew Knight and Mark Korda.

APN and Grocon came to legal blows about a development project on Melbourne‘s Collins Street that went all the way to the High Court and the firm is classed as a litigation creditor of the collapsed builder.

APN said the litigant creditors, who depend on the Barangaroo case for significant returns, were “flying blind” and unable to make judgements on the likely success of the case.

The company said in a letter said it was “impossible” for any creditors to properly review, consider and assess KordaMentha‘s report ahead of the meeting as the collapse revealed a myriad of intercompany loans and transactions that must be assessed to determine whether to take the Grollo deal.

The letter also lashed the administrator‘s approach and apparent pushing of a deed that would rely on smaller creditors to get over the line.

APN said even a “cursory review” of the report showed ”it appears to be encumbered by omissions and errors that misrepresent both creditors’ and Grocon Group’s positions in material respects”.

“We particularly draw the administrators’ attention to the class of “small creditors” that Grocon Group proposes to pay out immediately on entry into the proposed DOCA. This proposal effectively buys those creditors’ votes in favour of the DOCA notwithstanding the absence of any time to properly consider what may be available in a liquidation,” the letter said.

The Grocon dispute has split Melbourne’s tight knit business community. Picture: Den Hollander Derrick

APN warned that the prospect of an immediate payout was “at the expense of and to the prejudice of the other creditors, who may lose this opportunity to reject the DOCA”.

APN’s letter also questioned Grocon‘s much-vaunted claim against Infrastructure NSW over its treatment at Barangaroo, saying there was an “absence of any material in respect of the claim”.

“We do not know who the funder is, how far progressed the proceeding is or whether any merits advice has been obtained and if so, what that advice is,” the letter said.

A Grocon spokeswoman declined to comment, noting a response was a matter for the administrators.

The Grocon dispute has split Melbourne’s tight knit business community, with fellow creditor the Liberman family’s Impact Investments also understood to be considering its position and superannuation fund-backed manager ISPT, a creditor dating back to the development of Sydney’s Liberty Tower, also meeting with APN.

Meanwhile, Daniel‘s father Bruno Grollo, who has maintained a public silence, is still a large investor in APN, which is headed by 1980s Grocon lieutenant, Chris Aylward.

The letter also questioned the nature of the administrator‘s relationship with the Grollo family.

“We are also concerned, in light of the contents of the report and the DOCA, about the current administrators’ relationship with the Grollo family and what bearing that has had on the material provided,” it said.

APN are pushing for a second independent administrator to be appointed to review the report and the terms of the proposed DOCA.

In a shot across Mr Grollo‘s bows, the company warned that if the proposed DOCA was approved “it will be inevitable that an application will be made to set it aside”.

“The result will be a quagmire of litigation. Whilst the validity of the DOCA is before the Court, creditors will receive nothing in the short to mid-term,” the letter said.

KordaMentha declined to comment, but the Australian understands a response to APN’s philippic will be publicly released on Monday.

APN said it would air its concerns at the Tuesday meeting if it went ahead.

In a detailed critique of KordaMentha‘s report the letter pointed to a series of “significant loans” that were likely voidable and are outstanding to the Grocon Group by related parties.

These include $4.86m owed by Ploutus Pty, which is controlled by Mr Grollo and former wife Kat, whose own legal action laying claim to properties, including a luxury apartment in Melbourne‘s Eureka Tower and a US holding, could complicate any recovery actions.

“Media reports suggest the [US] apartment comprises two units in Trump Tower in New York. If true, this is a significant asset which the loan has been used for,” APN said.

The much debated Eureka penthouse could also be worth more like $25m rather than the $12m assigned by KordaMentha, it added.

A further $11.49m loan to Mr Grollo and $64.86m lent to the Twenty Twenty2 Family Trust also came under fire, particularly the latter deal which “appears to have been provided whilst the Grocon Group was insolvent”.

Loans of $11.64m also went to the Grocon Funds Management Business, which is the build to rent business operated with Singapore‘s GIC. “This asset should be also included in the net asset position of Daniel Grollo,” APN said.