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Brookfield Multiplex NZ liquidators say $8.5M payment to parent made while insolvent

Thursday 4th July 2013

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The liquidators of Brookfield Multiplex Constructions (NZ) say it made an $8.5 million payment to its parent while insolvent and they're mulling options to recover the distribution

Australian engineering and construction contractor Brookfield Multiplex put its New Zealand unit, whose projects included the Sylvia Park Shopping Centre and the Pegasus Town development, in liquidation in December citing a lack of new work in a tough market.

Liquidators Anthony McCullagh and Stephen Lawrence of PKF Corporate Recovery & Insolvency (Auckland) made their initial report on Dec. 10, estimating a shortfall to unsecured creditors of $2.4 million. They also said they were investigating a claim against the owner of the company over a distribution made in December 2011.

In their second report published today, they identified the size of the payment and revealed they have been in ongoing correspondence with the parent and its lawyers seeking recovery of the funds. Brookfield Multiplex disputes the payment was made while the local unit was insolvent, they say.

"We are currently in the process of considering the latest correspondence received from the shareholders' solicitors and will then decide what action to next take," they said.

The company's accounts show that at the time of the distribution, another unit in the group called Brookfield Australia Investments Ltd (BAIL) owed the New Zealand business $13 million and the $8.5 million dividend, effected by a journal entry, "was paid by way of a reduction in the debt owing," the liquidators said.

The accounts also show BAIL made advances to and payments on behalf of the New Zealand company of $6.68 million and that taken with the offset from the distribution, left BAIL as an unsecured creditor for $2.1 million. The liquidators dispute these entries however, saying that from its investigations at least $5.2 million and most likely the full $6.68 million advanced by BAIL "was in fact advanced/paid by the shareholder."

McCullagh and Lawrence have sold high-value fixed assets to the company's former landlord and others sold by auction, the report says.

There are five significant claims against the company relating to construction contracts which are before the courts at various stages, of which four so far have been granted leave to continue. Its contracts included Spencer on Byron, Nautilus Apartments, Century on Anzac, Victoria Apartments and Sylvia Park.

The company's insurers require the company to defend the proceedings, "however, without funding we are not in a position to defend any of the proceedings," the liquidators said. They are now in talks with other parties.

Brookfield Multiplex Constructions (NZ) had a loss of $4.4 million in calendar 2010, the last year it provided results to the Companies Office. That's down from a loss of about $39 million in the previous year. Construction revenue was about $37 million in 2010.

Brookfield Multiplex was formed in 2007 when Canada's Brookfield Asset Management acquired Australian developer Multiplex, whose projects included the troubled Wembley Stadium development, for about A$7.3 billion including debt.

The New Zealand company sold its 50 percent stake in Pegasus Town Ltd to partner Infinity Investment Group in 2010 for $1 million, having taken a $34 million impairment the previous year.

Pegasus Town went into receivership last August, owing some $142.8 million to a joint venture between Goldman Sachs and Brookfield Asset Management, which bought the debt at a discount in 2011 from Bank of Scotland International as part of a $1.3 billion portfolio in New Zealand. The development was acquired from the receivers by Todd Property last year.

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