Arrow International has gone into voluntary administration after insisting for more than two weeks that it didn’t have cash flow difficulties.
Subcontractors have been removing their tools from Arrow building sites, and will be wondering if they will get paid.
It’s yet another construction industry collapse, after Ebert and ex-Hawkins company Orange-H went under last year.Tradespeople are expected to lose millions from both these companies.
Meanwhile a High Court judgement this week against the directors of failed firm Mainzeal would see contractors likely get less than a quarter of the money they are owed.
And last year Fletcher announced it had lost the best part of $1 billion over 18 months and temporarily said it was stopping multi-storey construction.
Accounting firm BDO says partners Andrew Bethell, Andrew McKay and Colin Gower have been appointed joint administrators at Arrow.
“This is not the outcome we wanted or expected, but in light of a recent adjudicator’s decision, we had no choice but to take this course of action,” Arrow says in a statement, which says the move requires court approval.
“We were greatly surprised by the adjudication in favour of another contractor in a disputed Auckland project and the financial obligation attached to the decision left Arrow with insufficient cash flow to meet its day-to-day operating costs,” it says.
“We have managed the tough trading conditions which have stressed the entire sector but this unexpected result has affected solvency to the point that we could not sustain trading as we have been.”
BusinessDesk has been asking the company questions about its financial state and about a $4.2 million award against it in a Building Disputes Tribunal adjudication. When asked specifically whether the company was suffering cash flow problems, chairman and 50 percent shareholder Ron Anderson on Feb. 13 said: “That’s not the case.”
Anderson said Arrow works with hundreds of subcontractors and that it did sometimes have issues with them. He confirmed there was a dispute with subcontractor March Construction, a Christchurch-based company now owned by France-based Vinci Construction.
That was before the adjudication was decided.
After the adjudication was decided, Arrow chief executive Ken Forrest said in an email on Feb. 21 in answer to questions about the March dispute that “Arrow is unable to offer comment at this stage, as the adjudication is not yet finalised with a final agreement not yet reached.”
Forrest confirmed that the dispute related to work March did on student accommodation towers in Anzac Ave in Auckland.
He said at the time that the towers were “progressing well with fitout works underway” but didn’t respond to further questions about the adjudication.
BusinessDesk has had it confirmed by two sources that there has been a final adjudication on the matter and that March was awarded $4.2 million.
The Building Disputes Tribunal’s website says that: “the respondent cannot delay, avoid or avert the adjudication process and will be bound by the outcome, whether or not the respondent participates in the process.”
While there are some limited avenues of appeal to an adjudication, a company that has an award against it is required to pay the other party immediately and to argue about it later if it so chooses.
Arrow has recently completed the Rydges Hotel at Wellington International Airport. BusinessDesk understands that project was delivered on time and within budget.
BDO says the purpose of voluntary administration is to try to achieve a better outcome for creditors than what results from other formal processes.
“Construction sites will be closed temporarily while the administrators assess the position and engage with project principals to seek a solution.”
It says Arrow employs about 250 staff on projects around New Zealand whom the administrators will be meeting as a priority.
“Arrangements will be put in place should subcontractors wish to remove personal items from sites. The administrators have been advised that retention funds have been set aside in trust as required under the Construction Contracts Amendment Act 2015.”
The administrators will hold a meeting with creditors within eight working days in Auckland, Wellington and Christchurch and don’t intend to make further comment until after that, BDO says.
Today’s statement from the company says most of Arrow’s large projects have been completed or are near completion and that, wherever possible, the project teams will be retained to successfully complete the works.
The Stuff website reported that the subcontractors working on an Arrow construction site on the corner of Courtenay Place and Taranaki Street in Wellington were removing equipment from the site earlier today and that rumours about Arrow going into voluntary administration had been swirling for two days.
The construction industry has been awash with rumours about companies in financial difficulty ever since Fletcher Building’s problems with the construction of high-rise projects began to become public knowledge in mid-2017.
The collapses last year of Ebert and Orange-H, the part of the Hawkins business Australian purchaser Downer didn’t want, heightened awareness of how close to the wind many companies have been operating.
Fletcher lost the best part of $1 billion over 18 months while Orange-H’s liquidator is trying to untangle $453 million of related party loans to try to determine whether there will be any funds available to pay $93.8 million on unsecured claims from 249 tradespeople and suppliers.
Ebert’s receivers said last October that they expected most of the $33.8 million owed to tradespeople and subcontractors won’t be paid.
Arrow’s website says Anderson and partner Bob Foster started the business in Dunedin in 1984.
In today’s statement, the founders say that they “have been very fortunate to work on many significant building projects with great people, friends and work associates. In recent times, the construction industry has become challenging and there is a disproportionate level of risk carried by contractors.”
Companies Office records of finance charges registered against Arrow include a number of motor vehicles as security and other secured parties including plumbers, electricians and building products suppliers. ANZ Bank is also a creditor with loans apparently maturing on Nov. 8 2020 and Nov. 9 2021.