Builder's debt burden close to $6m

By ANNE GIBSON

Embattled builder Akita Construction has issued accounts to creditors revealing its financial position is much worse than the $2.3 million owed to trade and building materials firms.

All up, Akita owes almost $6 million, its August 31 statement of position shows.

Liabilities include $3,495,000 accounts payable and $1,824,000 retentions payable on work completed.

But Akita also owes its own shareholders $666,000.

Akita is unable to pay its 199 creditors $2.3 million and is pleading with them to agree to wait until April for full payment under a scheme of arrangement proposed to stave off legal action.

Akita director Mark Dixon wrote to creditors, saying developers were holding back money, blaming the leaky building syndrome. This was jeopardising the future of the $30 million Auckland building business, which would be liquidated if creditors did not agree to the scheme of arrangement, run by insolvency specialist Jeff Meltzer. Creditors will vote on the deal in Auckland on Wednesday.

Some Akita creditors said this week that they would back the proposal to give it until next year to pay its bills.

Others were angry to have their financial exposure to Akita's woes revealed.

"You're just a sensationalist scumbag," shouted Auckland Civic managing director Chris Taylor, whose firm is listed as Akita's largest creditor, owed $198,497.

"You don't care about us or our staff or consider the effect of this on people's lives."

Other building supply creditors said they had much larger clients than Akita who could not pay $750,000 monthly bills because of the rotting homes crisis and the loss of confidence in the industry. Builders were demanding different materials and asking for more traditional cladding supplies like weatherboards, one retail trade merchant said.

Another Akita director, David Weir, said the incorporation in July of a new Akita entity, Akita Group, was not done to evade creditors. It has taken over the development workload.

Akita Group is building the Manuka Cove housing development at Glenfield for Taradale Properties, the 70-unit Bay Palms multi-density Browns Bay development and the Smales commercial development at Botany Downs.

Asked how Akita Construction could trade its way out of insolvency and pay creditors if it was not the entity earning fees from new development, Mr Weir said he was unable to answer the question.

Building Subcontractors Federation chief Peter Degerholm said problems at Akita could easily spread throughout the building industry and the future of other companies was in jeopardy.

"The Akita situation is a symptom of a sudden loss of confidence and panic," he said. "It's spreading like wildfire."

The building industry is due for a legal overhaul when the Construction Contracts Bill - expected to be passed this year - becomes law. It will change disputes resolution in the industry, force mediation between developers and builders in crisis, and fast-track payment systems.

Akita, an established builder with an associated joinery business, has specialised in building multi-density housing developments, which are at the centre of the rotting homes scandal.


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Further reading
Feature: Leaky buildings

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