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Leaky buildings, Chinese supply botch fell Mainzeal over just $20m

Mainzeal, one of New Zealand's best-known commercial construction firms, placed its operating business in receivership as a combination of leaky homes suits and a botched supply chain from China combined to take the company down.

In a dramatic yesterday afternoon on Waitangi Day, Mainzeal Property and Construction was placed in the hands of receivers at the accounting firm, PwC.

At the same time, the former Prime Minister Dame Jenny Shipley, former head of Brierley Investments Paul Collins and a Tauranga businessman, Clive Tilby, resigned from the board of Mainzeal Group, which owns MPC, which they had already left last December.

The joint statement said all three had resigned from MPC last December at the request of Richard Yan, the ultimate shareholder in Mainzeal and a celebrated Auckland business leader who came to New Zealand from China in 1981 for tertiary education and stayed while building business links back to China.

Mr Yan is chairman of the Richina group of companies based in Auckland and Shanghai, and spoke at the launch of the government's China trade strategy in Auckland last year.

BusinessDesk understands the receivership is over the failure to make a $1.8 million payment on an outstanding $20 million credit facility, and that this was the last straw in a string of difficulties the company had faced in recent years.

MPC had been emerging from the aftermath of a multi-million leaky building suit involving Hobson Towers, a two-tower, 97-unit block in Hobson St, Auckland.

More recently, it is understood MPC had been caught in supply chain difficulties involving the New Zealand arm of the King Façade Decoration Engineering Co, a Shenzhen-based company supplying product to the New Zealand market.

Mr Yan's company, Richina, was in a joint venture with King Façade to supply Mainzeal with product, according to King Façade's New Zealand website.

Mainzeal is a well-known New Zealand construction company, and a major player in the Christchurch post-quake rebuild.

In a statement, receivers PwC said Mr Yan had advised them that MPC had suffered "a series of events that adversely affected the company's position, coupled with a general decline in commercial construction activity".

Dame Jenny, Mr Collins and Mr Tilby said in a statement that MPC had been "meeting its obligations as they fell due and had facilities with its bankers that enabled it to continue to operate".

"We agreed to accept the role of directors Mainzeal Group Ltd based on the undertakings and assurances given by the shareholder (Yan) at the time. Sadly, these have now changed, which have led to our resignations."

The company had been "working towards a positive cashflow and profitability in 2013".

Insurance group Vero, which uses Mainzeal as a major partner in the commercial reconstruction of Christchurch, said it had "not been using Mainzeal for any domestic projects".

"They have been involved in a small number of our commercial reinstatements. We will continue to work closely with our customers to ensure their progress is not impacted.

"This will not affect the overall recovery in Christchurch," the company said in a statement.

Mainzeal's website shows it had been reacting to the lack of demand for commercial construction by moving into construction of affordable housing projects, which has emerged as a key political issue in 2013.

(BusinessDesk)

Comments and questions
20

Did Jenny and her co directors resign ahead of this step to avoid any culpability?

This is just another example of the low standards in the NZ construction industry. Nothing beats good old experience. Management, engineering, quantity surveying and trades cannot be learned from a computer.

So True!.
This comment applies to most of the woes confronting NZ be they in Construction, Education,Health, Defence; and so the list goes on.
Time on the factory floor, or at the workface is the greatest tutor and route to experience.

Whilst it's not up to Government to prop up commercial enterprise, one has to wonder if MPC isn't just another co-casualty alongside the residents (commercial and residential) of Christchurch from the insurance and government delays in the Christchurch rebuild.

I wonder if Mainzeal were building any schools? That should have MoE worried.

Well - Vero & Mainzeal were about to repair our domestic house in Christchurch. Staff representing the two companies visited us together last week.

How could anyone possibly "dislike" this comment? John just states a fact!

Possibly, Jenny, Paul & Clive?

A construction company that decided to short cut the supply chain & become an importer of cheap product ... it also highlights why local manufacturers, supplier & distributors do add value to business.

The joy of a Global Economy, shoddy products and shoddy deals.
Caveat emptor in a 'free' market. What is the true cost of the free market? The consumer suffers, those respnsible simply resign and, the shareholders dust off the coins lost and search for the next promise of a cash cow. Still good news for Fletchers and Hawkins. Yay!

Yet more evidence that again a free market leads, inevitably, to a duopoly, e.g. Foodstuffs and Progressives, Telecom and Vodafone, Fonterra and Goodman Fielder (all complimneted with one or two second tier rivals.)

I wonder what is the most shoddy, shonky and destructive product and deal of all time in the building trade in NZ?

Thinking really hard and I just got the answer!

NZ very own non-treated timber! The deal struck to allow this insidious building product has cost NZ billions.

Good one, NZ!

This is quite shocking, and very sad for hundreds who will be in dire straits as a result. These are very worrying times now for so many breadwinners, family people in different lines of work, tradespeople, and professionals, while hundreds of millions of dollars continue to be thrown at Maori activist-only interests.

Again, another company collapsing in a once far more prosperous country that has for too long now been at the mercy of ideologically motivated theorising, and an unwillingness, while wedded to the mantra of globalisation, to first do no harm. First look after your own people.

What responsibility do Jenny Shipley and her co-directors bear for this debacle? And when can we predictably look forward to seeing the takeover of Mainzeal by Chinese-only interests?

Collapse was in large part due to leaky homes - shoddy NZ timber and shoddy building techniques, design and construction.

Guess who is at fault here?

you and richard yan are the same bloody thieving chinese. 干你妈的屄.

thank you.

nice maori activist comment...I like how you managed to slip that one in...makes me ashamed to be of maori/chinese decent...wish I was one of your people...then I'd be the first to be looked after.

It would be interesting to see who purchased Fletcher shares a week or so ago?

Or who was selling?

My concern is there are already signs of struggle with the size of the work, not only in Christchurch but also in Auckland. This is akin to a mini driving along the road and having a tyre fall off. While I am against Government intervention, the timing of this couldnt be worse. I like the USA's Chapter Eleven for situations like this. Surely, with help, going forward, Mainzeal could trade their way out of this situation.

I wonder how many of the directors have qualifications in building. Or even know how to operate a sledge hammer?

"Facade" seems to be the operative word here.