Jamie Gray

Jamie Gray is a business reporter for the New Zealand Herald and APNZ wire agency

Directors claim full knowledge of finances

Assurances changed unexpectedly at end of January, say board members.

Former independent directors of failed construction group Mainzeal said they had full knowledge of the company's financial position at all times, refuting earlier media reports.

TVNZ reported the directors did not know until the end of last year that the company needed capital.

"All directors, including the independent directors and the director and shareholder Richard Yan and the management, worked hard on the particular business challenges we faced through the middle and latter part of 2012 and with the support of our bankers had arrangements in place and equity support from our shareholder up until late January of this year," former independent directors Dame Jenny Shipley, Paul Collins and Clive Tilby said.

"Furthermore we had a three-year business plan, banking arrangements in place, negotiations were going on with the shareholder and commitments were being made by the shareholder regarding future support for the company which would see it return to a cash flow positive position and profitability in 2013," they said.

At the end of January, written undertakings and assurances that the company, the independent directors, and the bank had relied on, changed unexpectedly.

"This led to the bank withdrawing support and despite exhaustive efforts by many people, a binding commercial solution was not able to be achieved. At that point the independent directors felt they had no choice but to resign," they said.

Yan, citing difficult trading conditions and withdrawal of shareholder support, put the company into receivership on Wednesday.

Mainzeal, the country's third biggest construction company, has suffered from a "series of events that had adversely affected the company's financial position", combined with a general decline in commercial construction activity and lack of shareholder support, Yan said.

PwC partners Colin McCloy and David Bridgman have been appointed receivers.

Mainzeal, the largest construction company behind Fletcher Construction and Hawkins Construction, employs around 400 people.

It has been involved in $7.5 billion worth of projects, including Vector Arena and the Two Double Seven shopping centre in Auckland and the Supreme Court in Wellington.

It is understood the receivership was over the failure to make a $1.8 million payment on an outstanding $20 million credit facility.

- APNZ

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