New builders, $15 million bailout: Porter Davis collapse fallout continues

Customers of collapsed builder Porter Davis could have their unfinished homes completed by new contractors, while the company’s liquidators say it may have been trading while insolvent.

The Victorian Managed Insurance Authority has enlisted Simonds Homes, Metricon and other builders to quote for the completion of Porter Davis clients’ homes.

About 1700 homes across Victoria and Queensland were left in limbo when Porter Davis suddenly shut in late March owing creditors $147 million.

Some 560 Victorian clients were not covered by insurance despite paying the construction giant before it went into liquidation, forcing the state government to set up a $15m bailout scheme.

The insurance authority did an independent assessment to confirm the builders’ financial strength and operational capacity to complete the works required, over and above their existing projects.

Simonds Homes confirmed it would complete a few hundred unfinished homes.

“We’re financially strong and we have capacity to take on these builds,” managing director Rhett Simonds told 3AW on Thursday.

Metricon Homes will also help more than 300 Porter Davis customers finish their builds.

“We are confident that we have a strong plan to deliver homes for ex-Porter Davis customers without impacting our existing Metricon customers,” chief executive Brad Duggan said.

Liquidators Grant Thornton gave creditors a statutory report that reveals Porter Davis may have been trading while insolvent.

But Grant Thornton says if such a claim is made the former directors may have a defence.

Creditors and customers of the failed company were handed the detailed report on the preliminary findings into the firm’s collapse on Wednesday.

“On the basis of the information available to us as part of our investigations to date, it appears the group was likely insolvent from February 2023 onwards,” the report reads.

“Our investigations are continuing and our findings will be presented to ASIC in due course.”

Grant Thornton was appointed on March 31.

According to the report, there were indicators of insolvency before February.

But there were mitigating factors including the availability of funding from the Commonwealth Bank and the support of a key shareholder, Chesapeake Pty Ltd, which injected $24.6m to help Porter Davis between April 2022 and the end of January 2023.

If a claim for insolvency from February is identified, the directors may have a safe harbour defence, Grant Thornton noted.

Safe harbour provisions provide directors with the opportunity to develop a plan reasonably likely to lead to a better outcome for the company than if it had entered into voluntary administration or liquidation.

Directors of the companies engaged Deloitte to provide formal safe harbour advice on March 2.

Grant Thornton has requested a copy of the advice.

The report details the years leading up to the March failure, including a growth of staff in December 2021 despite the company experiencing losses and stress because of the COVID-19 pandemic, labour and material shortages and cost increases.

Adrian Hondros left as chief executive in June 2022, after getting a $6.25m payout in November, and the new chief started reducing employee numbers.

The company resorted to consulting firms several times to improve its position and tried asking the Commonwealth Bank to change its credit conditions soon before shuttering.

It also asked the bank and Victorian government for a bridging loan that was rejected by the state.

A creditors’ meeting will be held in Melbourne and Brisbane on June 28.

MONEY OWED BY PORTER DAVIS

* Commonwealth Bank of Australia $33m (likely to be paid in full)

* Chesapeake $24.6m (likely partial dividend)

* Employee priority creditors $18.1m (likely partial dividend)

* Ordinary unsecured creditors $71.5m (dividend unlikely)

Source: Statutory Report by Grant Thornton