Who wants $14.9m from Scarbro trio: 300 suffer from 2023′s biggest builder failure

The Hadlow ,Grey Lynn: 124 apartments for Conrad Properties, site now frozen. Photo / Alex Burton

NZ’s largest construction company insolvency this year has left about 300 creditors owed an estimated $14.9 million.

McGrathNicol liquidators Andrew Grenfell and Conor McElhinney’s first report on a trio of insolvent Scarbro businesses contains a seven-page list of businesses and people who are creditors.

Local and international companies are there, some associated with some of this country’s largest corporates, along with smaller entities: from a business owned by New Zealand’s richest man to sole traders specialising in finishing trades.

A number of NZX-listed companies and their subsidiaries and associates appear.

Painters, electricians, retailers, hire businesses, lawyers, bathroom equipment suppliers, concrete specialists, crane companies, portaloo suppliers, joiners, office stationary retailers, waterproofers, recruitment specialists, scaffolders, container suppliers, a bank, a car parking company, kitchen, roofing, telco, accounting, landscaping, water, insurance, grouters, pest exterminators, floor suppliers, equipment hire, welders, bin suppliers, stair makers, air conditioners, power tool sellers, coffee suppliers, media, window and door manufacturers, plumbers, cleaners, other builders, aluminium suppliers, fabricators, insulation and concrete suppliers, appliance specialists are all named as wanting money.

You name anything you see happening on a building site and those supplying equipment, trades and labour to enable construction to occur appear on the new list.

Some of the big names include national building supply chain Carters, owned by Rank Group which is controlled by New Zealand’s richest man Graeme Hart, along with seven Fletcher Building businesses: Fletcher Distribution, Fletcher Concrete and Infrastructure, PlaceMakers at Mt Wellington, PlaceMakers in Cook St, Mico Plumbing & Bathrooms, Tasman Insulation and Firth Industries.

This Great North Rd complex with 124 units was being built by Scarbro when it folded this month. The project is called The Hadlow and it's in Grey Lynn. Photo / Alex Burton

ASX-listed Wesfarmers has two businesses on that list: Bunnings and Bunnings Warehouse.

The powerful locally-owned national hardware, DIY and building supply co-operative Mitre 10 is there along with NZX-listed Warehouse Group’s Noel Leeming Group and the well-established Fisher & Paykel Appliances.

Global business Kone Elevators Pty, Christchurch-headquartered Smith Crane & Construction owned by the family of ex-MP Nick Smith who is now Nelson’s mayor appears, along with another southern-headquartered national business - Fulton Hogan’s Stevenson Concrete and Stevenson Aggregates.

Local government entities are there too: Auckland Council and Watercare Services.

Eco-bin hire business Green Gorilla, Prestige Loos, Ricoh Finance, Ricoh New Zealand and NZX-listed Steel & Tube appear along with Steel and Tube Reinforcing and fellow NZX-listed Meridian Energy and Spark New Zealand.

Heavy equipment specialists Porter Group has a number of entities listed as creditors: Porter Cranes, Porter Access Hire, Porter Finance, Porter Haulage, Porter Hire, Porter Equipment, Porter Mechanical, Porter Parts and Porter Properties.

Some creditors have security over the three failed Scarbro businesses and they’re usually the larger ones including Carters, Bunnings, Porter Access Hire, Mico, Stevenson Aggregates, United Rentals, Upright Access and ANZ.

Scarbro Bros., Scarbro Civil and Scarbro Construction Holdings and co-founder Garry John Scarborough are also creditors along with fellow director Peter John Davis and the Davis Family Trust. Both Davis entities and Scarborough himself are secured creditors meaning they rank ahead of unsecured creditors.

It was Scarborough and Davis who called in McGrathNicol to liquidate the three businesses on April 6.

Garry Scarborough is himself a creditor. Photo / Scarbro Construction

Paul Scarborough, Garry’s brother, owns Scarbro Civil and Scarborough Bros. He said this week his two businesses were not connected with the trio of companies in liquidation. The brothers originally founded Scarbro Construction in 1996.

He stressed his earthmoving and transport companies Scarbro Civil and Scarborough Bros. were unconnected to the companies in liquidation. But now, those two businesses - Scarbro Civil and Scarborough Bros. - are also creditors, according to the first report. Some people thought he was connected to the insolvent trio, he said, but that wasn’t the case. He wanted to distance himself from the building sector failure.

Sky Network Television, Southern Cross Healthcare, Rentokil, Office Max, Mercedes-Benz Financial Services, Site Safe, A1 Landscape Services, BDO Auckland, Baker Meech Lawyers, MYOB NZ, The NZ Coffee Company and Ice Fire Protection appear as creditors.

Sky Network Television is named as a creditor. Photo / supplied

So does John Filimore Contracting, Polished Concrete, Crosbies Security, Hills Commercial Floors, Metal Concepts, PBI Height Safety, power tool specialist Hilti, Roading Solutions, NZWindows Auckland, Allied Plumbing, Gas & Drainage, Bassett Plumbing & Drainage, NZ Fire Doors, Franklin Plumbers & Building Supplies, Cavity Sliders, Complete Painting & Maintenance Services, Davco Electrical, Ewing Insulation, Hotspot Welding, Mason Containers and Rylock trading as Auckland Aluminium Joinery.

The liquidators said yesterday Scarbro Build is estimated to owe $10.01m, Scarbro Construction Holdings $3.5m and Scarbro Construction $1.3m. The first business is most indebted owing unsecured creditors $4.09m, retentions of $2.06m, intercompany payables of $2.53m and related party loans of $700,000 which make up that $10.1m.

Debts are to unsecured creditors, retentions held back by the builder yet to pay suppliers and those who contributed skills and labour on its contracts, intercompany loans of nearly $3m and other related party loans of more than $4m.

But $21m assets also appear on that statement of company affairs but how much can be realised from that is uncertain.

But it has no final total of estimated deficit or credit on the statement of financial position. Scarbro Construction Holdings is the richest with $12m, Scarbro Build has $7.3m and Scarbro Construction $2.2m.

Assets include ANZ bank accounts, retentions the company holds which haven’t yet been paid out, accounts due to be paid of more than $4.3m, fixed assets of $3.9m and intercompany receivables of $7.2m.

However there was a grim note with the $7.2m figure: “Intercompany receivables outstanding are unlikely to have any recoverable value,” the report warned.

And in a further blow, it said: “Other current assets primarily relate to deferred tax and future tax benefits if the companies were to make a profit in the future. These future tax losses will be written off by the Inland Revenue upon the completion of the liquidations.”

Work and Income’s wage subsidy search engine shows Scarbro Construction Holdings got $541,000 for first 56 then subsequently 43 employees via the Government’s Covid cash scheme.

Paul Scarborough’s separate business, Scarborough Bros., got $433,000 in wage subsidies for 23 to 24 people in four separate payouts from Work and Income.

The business said on its website before it failed that it had employed 60 people. Employees and Inland Revenue are preferential creditors and money owed to them will be determined in the chain of activities the liquidators plan.

“The liquidators are currently assessing the quantum of preferential claims due to employees and amounts owed to the Inland Revenue for GST and PAYE,” the first report said.

It was unlikely unsecured creditors would be repaid in full.

No date has been given for when the liquidation will be completed.