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McConnell firm shortchanges creditors

By Jock Anderson

Friday 9th May 2003

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Creditors owed $3.4 million by a delinquent company owned by construction and development giant McConnell International have accepted a part-payment compromise deal.

HGM Group creditors, who number more than 400 mainly small to medium businesses, voted to accept a 30c-in-the-dollar deal pushed by principal David McConnell (37) and fellow directors desperate to avoid liquidation.

McConnell International, which through its Hawkins Group is the ultimate parent company of HGM Group, promised to guarantee the 30c payment, 75% of which is due in nine months, with the remaining 25% due six months later.

According to a creditor directors balked at a creditor's call for personal guarantees.

The creditor said Mr McConnell put on a "big show" in front of creditors, rubbing his face, running his hands through his hair and looking anxious "but he didn't fool anyone."

Mr McConnell declined to speak to The National Business Review but in a prepared statement said HGM's situation was "unique in that it was the victim of a savage downturn in the forestry sector to which it was heavily exposed."

He said McConnell International had to limit its exposure to what he termed "the HGM liquidation" and the compromise offered the best possible outcome for creditors.

John Waller and Colin McCloy of PricewaterhouseCoopers were appointed by HGM Group directors as administrators of the compromise.

According to a creditor, directors manoeuvred their way out of a 32c payment in exchange for a McConnell International guarantee.

A construction and engineering business operating mainly in the Bay of Plenty and central North Island regions, HGM Group is said to have employed more than 100 people ­ now laid off.

An Engineering, Printing and Manufacturing Union spokesman said while the laying off of about 30 employees at HGM Group's Kawerau branch came as a shock, they received their entitlements and there appeared to be no outstanding issues.

Twenty-two employees were laid off at HGM Group's JedSteel operation in Tauranga.

Tauranga-based paint supplier Altex Coatings, owed $72,000 and which voted against the compromise deal, attacked HGM Group for its cavalier attitude of not paying its bills after exploiting its big-name parent to suck in trade creditors.

Altex Coating managing director Mike O'Sullivan said that when seeking credit HGM Group cashed in on the McConnell name to give the impression it was good for its debts.

Mr O'Sullivan's comments were echoed by Derek Clark, manager of 13-strong Matamata plumbing business Gordon L Burr, owed $44,000.

"This has been very hard for us to absorb. We thought HGM had a close tie with Hawkins so we trusted them to pay their bills but the directors want to walk away," Mr Clark said.

HGM Group, a construction engineering company, is owned by Hawkins Group, which in turn is part of McConnell International.

Hawkins has a $180 million annual turnover and is considered one of the biggest builders along with Fletcher Construction, Multiplex and Mainzeal.

McConnell International includes McConnell International Property, Steelpipe NZ, Hawkins Construction and Bisleys Environmental.

McConnell International Property is involved in a number of swanky property development schemes including the multimillion-dollar Trinity Apartments opposite Auckland Cathedral in Parnell.

One of its biggest projects is the planned 15-year redevelopment of the former Ra Ora Stud in East Tamaki into Highbrook ­ an industrial precinct touted by Mr McConnell as an international-class business park.

That project has been estimated to cost $500-750 million.

McConnell International was formed in 1993, growing from the remains of the McConnell Dowell international engineering and construction business.

David McConnell inherited joint control of the McConnell empire in 1995 following the shooting death of his father Malcolm "Buck" McConnell on the family's showcase south Auckland estate Ayrlies.

David McConnell is an original director of Mighty River Power and a trustee of Competitive Auckland and a planned Manukau Pacific Events Centre. Last year Mr McConnell pulled off a criticised deal for Hawkins Construction with Auckland Racing Club for a land swap at Takanini and Puhinui.

For relaxation Mr McConnell and his south Auckland neighbours get "wet and wild" by competing in an annual local raft race.

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