Director offers to boost payout

By ANNE GIBSON property editor

Grave concerns about the wind-up of a cash-strapped builder have been allayed by a cash injection by one of its shareholders and directors.

As a result the outcome looks better than expected for creditors of Auckland builder GFF, says Peter Degerholm, executive officer of the Building Subcontractors' Federation.

GFF, formerly Equinox Construction, was backed by Asians who said they had lost confidence in New Zealand's economy. GFF owed $1.4 million to creditors and $1 million to shareholders. But now an investor has come to the rescue and is promising to pump cash into GFF to help bail out the creditors.

"It would seem that, as a result of combined pressure from the major creditors and the Building Subcontractors' Federation, the shareholders of GFF have reconsidered their position," Mr Degerholm said, adding that an extra $200,000 would be provided by those shareholders.

A letter from Equinox Capital director Chong Du Cheng to Nigel Milton of accountants BDO in Manukau dated October 26 stated that the money would be advanced:

"As I am the director of GFF, I feel I would like to make sure of the best possible outcome for creditors and for that reason, I am prepared to advance $200,000 from Equinox Capital Ltd's own funds to GFF Ltd for distribution to creditors, if the creditors' compromise is accepted by all creditors of GFF," he said.

Offering the money certainly helped creditors, Mr Degerholm said. It would increase the likely payout to them from between 24c and 33c to between 33c and 42c.

GFF has proposed a deal to its creditors whereby they do not apply to have it liquidated in return for the payout. The deal is being managed by Mr Milton of BDO.

For the scheme to work, 75 per cent of creditors need to agree.

"I am more comfortable with the prospects of an improved outcome, although I believe that the proponents could and should contribute more to provide a reasonable outcome for creditors and provide guaranteed payment amounts and times," Mr Degerholm said. Liquidation was a much less palatable avenue: "There may be satisfaction for some in seeing the company liquidated and the shareholders facing the music, but creditors are unlikely to gain from this.

"If GFF were liquidated, creditors would only get 8.5c in the dollar."

The federation did not represent any creditor, he added: "But it has taken a watchdog role." Creditors would need to vote "decisively" on the deal.

GFF had a number of developments under way when it collapsed. These included plans to build the 19-level apartment block at Number One Hobson, a site on the corner of Hobson St and Fanshawe St in Auckland. But David Henderson's Kitchener Group has a conditional offer to buy this property for more than $6 million.

GFF also built townhouses in Mt Eden.

* Creditors vote on the offer at 9 am on Monday at the Institute of Chartered Accountants offices, 27-33 Ohinerau St, Remuera.