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Hundreds go in Mainzeal layoffs

About 200 Mainzeal employees have been made redundant as receivers try to contain costs of the collapsed building company.

PwC's Colin McCloy and David Bridgman were appointed as receivers to Mainzeal Property and Construction Ltd and associated entities last Wednesday.

Mr McCloy told NBR ONLINE about 200 people on sites up and down the country, including head office staff, were told on Friday they had been made redundant.

That leaves about 200 people directly employed by the company.

Asked which sites receivers had closed down entirely, he says: "We're still working through that process; we're still reviewing every single site."

He would not say if chief executive Peter Gomm still has a job, saying: "I wouldn't want to make any comments on individuals."

Christchurch firm CeresNZ, the New Zealand unit of United States company Ceres Environmental Services, has emerged as a potential Mainzeal buyer

In a statement, Mr McCloy says: “We are currently in talks with some parties interested in buying the business and assets of Mainzeal, either as a whole or by segment.

"We understand the importance of a prompt and efficient management of this receivership and we remain committed to working as quickly as possible through this receivership."

BusinessDesk reports the company is understood to have failed because its shareholder, Richard Yan of Richina Group, didn't make a $1.8 million payment on an outstanding $20 million credit facility.

Bank of New Zealand withdrew credit facilities early last week, leading to the receivership and the resignation of three independent directors: former Prime Minister Jenny Shipley; former Brierley Investments chief executive Paul Collins; and a Tauranga businessman.

dwilliams@nbr.co.nz

More by David Williams

Comments and questions
17

This is a big job. Is going to take time.

And lots of money!

Seems incredible that it fell over a $1.8m debt on a company this size. Do the BNZ have a lot to answer for?

Which leaves hundreds of sub-contractors and tradesmen affected

Why would you still provide your service to Mainzeal, or any other company, if you have not been paid?

How can sub-contracters go unpaid for months and still want to provide their services?

Can't believe they let this go into receivership. Why couldn't they ring fence off the good part of the company (which would be made up of the existing building sites the company is involved in, but not the leaky home stuff and all liabilities), find a buyer and try settle the deal over the weekend. Would have allowed the building sites to open on Monday and keep work going.

Instead the value of their contracts have fallen to next to nothing as subbies are going to take apart the building infrastructure at the sites, resulting in more costs. Now to sell the company as a going concern is going to become less attractive to buyers each day.

It might be alright for a small company to go down the messy receivership route, but this is the number 3 construction company in the country.

Couldn't agree more. Given the writing was on the wall for at least 3 months, it's shame this didn't happen. During the worst of the GFC in 2008, investment banks crumbled and "Sunday night specials" deals were announced as a team of over-payed lawyers and bankers worked all weekend to haggle a deal... But the upside was the door were kept open and jobs and contracts preserved.

Mainzeal was an enormous litigation risk. You could never sell the enterprise as it would be a bottomless pit of leaky-building relatated costs and repairs. It also explains why BNZ didn't continue extending credit to it.

However, if you put it into receivership and sell off the assets, you solve that problem. The entities that survive will likely have shed the liabilities associated with leaky buildings.

What do you think the receivership process is for. It basically freezes in time all liabilities (i.e., water-tight issues) and allows the company to be sold, allowing the good contracts to be continued.

The problem is you can specify what liabilties are good (i.e., sub-contractors) and what are bad (i.e., water-tight issues).

The law sets an priority for repayment: secured debts (i.e., BNZ), followed by employees and IRD, followed by everyone else.

In the unlikely event there is any money left over, then everyone else gets paid on a pro-rata basis. Should there be a new level of priority for subcontracts put them on an equal footing as employees (?) or below that but above everyone else?

Peter Gomm should have been the first one made redundant.

The risk in these companies is carried the sub-contractors and workers. They use the workers' assets to fund there operations .It is the total reverse of risk to reward ratio. Workers carry the risk and the owners take the profit and J-donkey says every thing is well with the world. Oh, and you can't have a living wage, decent housing, or if you're a worker, a regular income.

Main contractors manipulate the cashflow, often delay payments to their subbies, often don’t pay the full value of monthly claims and hold all the power. Most comments I’ve read regarding Mainzeal/receivership & subbies indicate that people commenting don’t understand how the system is structured or how the mechanism works, increasing exposure to the subbies over the course of a contract or multiple contracts.
The simple solution is that it should be mandatory for the principle/client of a project to receive a payment schedule from the main contractor verifying their subcontractor payments made before a further progress payment is approved to the main contractor. This will force the main contractors to not use the subbies to fund the project, as they do currently. For Maurice Williamson to express no desire to address this situation beggars belief.
Each separate trades representative body should get together and form one representative organisation and lobby government on behalf of all contractors. Now how many voters would that be?!!

Maurice Williamson does SFA as a minister, now or when he minister for telecommunication back in the 90s. The only thing he does really well is taking home the pay cheques.

All started with New Zealand changing the building code back in the 1990s and brought in untreated timber and shoddy practices.

As ye sow, ye reap.

Yes lots of us went on Friday and there will be a lot more finishing tonight/ tomorrow as well. Everyone still employed is on a day-to-day basis at the moment.

I'm still in shock and can not believe this has happened. We were told everybody was paid and up to date on 21st December and that we had a plan going forward and would be profitable by mid 2013.
Now seeing the numbers coming out from subbies, it looks on the face of it that we have been lied too?!?

Another group not been discussed is the King Facade employees. They are not covered by the receivership, but where locked out as they are on a Mainzeal site. A Mainzeal site which they bought off Richina for a lot of money, where did that money go?