Property & Construction

Property and construction businesses today operated in an increasingly dynamic and competitive environment. The difficulties began in December 2007 when the Centro Properties Group was unable to refinance its $3.9 billion in maturing debt in the wake of the credit crisis. Then, financially engineered groups such as the Allco managed Rubicon stable of trusts and MFS Properties struck difficulties. The result has been a flood of commercial property onto the market. Analysts estimate that up to $20 billion of office towers, shopping centres, industrial sheds and hotels are for sale either publicly or off market.

As a result, any company that operates in the property and construction business now operates in a difficult and dynamic environment. A property and construction company in financial distress is in a very delicate position as making the wrong move can unnecessarily result in:

• the destruction of equity in the business or a specific project;
• disputes amongst owners, builders, lenders, employees, unions or other stakeholders that can last year’s;
• an event of default;
• a formal insolvency appointment.

A property company can face unexpected cash flow problems, even if it is trading profitably. Often it can trade out of temporary cash-flow problems without external assistance. However, if this cannot be achieved, a range of solutions can be employed including workout, refinancing and if necessary a voluntary administration.