Australian construction giant Probuild has collapsed and been placed in administration, leaving around $5 billion (US$3.6 billion) in building projects in limbo.
Probuild confirmed on Thursday that its South African parent company, Wilson Bayly Holmes-Ovcon (WBHO) Ltd, had abruptly ended all cash and securitisation support in Australia.
“We are caught up in a set of circumstances, not of our making. We are working closely with the administrator on a number of plans to protect our clients, subcontractors and employees.
“The Probuild brand is strong, and we intend to keep it that way. We have several options for raising the necessary capital to continue as a premium Australian building company. These will all be pursued,” a Probuild spokesperson said in a statement.
WBHO said they had adopted a more conservative bidding strategy for new lower-risk projects in response to Australia’s increasingly competitive and contractual construction environment.
However, sourcing acceptable projects had become impacted by COVID-19 and further complicated by the government’s “hard-line approach” to managing the pandemic.
Over the past four years, it had supported the Australian branch with two billion South African rand, equivalent to around $182 million (US$131 million).
“The Australian businesses have not been able to complete projects on time and not been able to recover variation and delay claims, resulting in material losses in the financial period to date and the requirement for further funding and balance sheet support from WBHOC,” it added.
Hundreds of workers employed by Probuild were met with closed gates without notice at different projects around the country.
Some Probuild projects include the tallest residential building in Melbourne, luxury apartments in Perth, and an all-suite tower in the Gold Coast.
In January 2021, WBHO had attempted to sell its Probuild business to a Chinese construction corporation.
Going forward, Deloitte, the company appointed as administrator, will focus on assessing Probuild’s financial situation and stabilising the business and projects “where possible.”
“We will also also be commencing a sale and recapitalisation process in order secure a new owner for the businesses,” Deloitte administrator Sal Algeri said.
The construction union, CFMEU, said it was currently seeking information to understand the situation’s impact on workers.
“As always, the union will work to ensure the interests of our members in the construction industry are made the primary consideration,” CFMEU Construction National Assistant Secretary Nigel Davies said.
Professor Jason Harris from the University of Sydney said the collapse of Probuild was a reminder that Australia needs effective insolvency and restructuring laws to help businesses that fall into financial distress.
“Singapore and the UK have recently introduced major new restructuring laws, and Australia should consider reviewing its insolvency laws as many of the rules date back to the 19th century or earlier,” Harris, who is an expert in insolvency law, told The Epoch Times. “A new modern insolvency and restructuring law might help companies stay in business longer.”
According to The Australia Constructors Association (ACA), the construction sector accounts for 25 percent of all insolvencies in Australia, a trend that will continue unless action is taken to improve industry sustainability, according to The Australia Constructors Association (ACA).
