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The Australian construction sector is highly cyclical and is therefore more susceptible to insolvency during economic downturns.
In the past 12 months we have started to see a number of failures across the construction industry including Built whose parent withdrew from the Australian market. We are likely to see further reductions in capacity as global construction giants focus their balance sheet capacity on more profitable markets with greater margins.
Key Challenges
- Rising crude oil and electricity prices have negatively affected both construction inputs and required energy supplies. As a result, firms that have struggled with rising expenses have collapsed, with flow-on effects hindering many related upstream and downstream industries such as construction suppliers and real estate agents.
- Building construction industries are forecast to continue declining over the short-term. revenue in the building subdivision is forecast to decline sharply over the short-term due to the absence of stimulus from the HomeBuilder subsidy, and despite mortgage interest rates remaining low by historical standards.
- Profitability is forecast to strengthen over the next 5 years, supported by modest improvements in demand from downstream building and infrastructure markets and a return to favourable conditions in many special construction trades.
- Employment and participation are forecast to grow steadily over the next 5 years, although some smaller building firms will likely exit.
- Revenue for the Heavy and Civil Engineering Construction segment is also forecast to strengthen over the next 5 years, due to continued record investment in transport infrastructure projects by State and Federal governments which is also putting pressure on demand and pricing in labour markets.
Our Experience
Speed is imperative in dealing with restructuring and insolvency in the construction sector. Due to the shortage of experienced builders and labour shortages we have seen developers leaning in to support struggling operators.
This means that project by project profitability needs to be determined quickly, and then where funding is required negotiating this with the developer or finding an alternative builder to minimise damages claims.
Olvera has completed a number of restructuring and insolvency assignments across the construction sector over the past 12 months while maintain trading operations on site.
Case Studies
Appointed Receivers and Managers over eight blocks (or stages) of land in the Salt Development.
The appointment was by the Pacific Alliance Group (Hong Kong) who had the top secured debt. Pacific Alliance Group appointed an agent in Australia called in the Winton Group which managed large parts of the Receivership.
The Receivership involved devising realisation strategies or the remaining uncompleted land development stages. As the receiver, we successfully engaged consultants to assist us to amend the construction certificates for the development stages and to develop and subdivide the remaining development stages. The subdivision was successfully remarketed and resulted in a very impressive realisation value of the land stock. In addition, we were able to successfully apply the GST margin scheme resulting in an increased return to the secured creditor.
OUR CLIENT
JOB TYPE
Strategy Execution
DATE
September 2021
Practitioner
Mirzan Mansoor, Max Sinclair, Kate Bernet, Damien Hodgkinson
Kate Barnet
Kate develops strategic solutions for groups dealing in crisis management and/or distress investment. He has over 30 years of experience working with distressed companies in the financial assessment, recoverability, and sustainability of risk assets.
MEET OUR TEAM
Olvera Advisors
PRINCIPAL
Kate Barnet is a recognised leader in the insolvency and reconstruction industry.
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Mirzan has in excess of 13 years of experience across restructuring and turnaround, corporate finance, mergers and acquisitions and corporate banking in Australia and in Singapore
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Michael offers Olvera Advisors over two decades of international restructuring expertise, adept at innovatively supporting diverse businesses, from small firms to listed companies.
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Tony contributes 15 years of insolvency experience to Olvera Advisors, with diverse industry expertise and a unique background in ASIC’s Enforcement Division.
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Neil Cussen, a leading authority in insolvency and reconstruction, offers 35 years of experience, excelling in asset tracing, business recovery, and cross-border insolvencies.
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Robyn’s inclusion in the Olvera team brings an added 15 years of expertise in corporate reconstruction, insolvency, and forensics.
