Almost $30m tipped into building firm before collapse
ALMOST $30 million was tipped into a Coast building company in the months leading up to its collapse.
A letter written on behalf of RGD Group Pty Ltd shareholder Greg Clark, understood to be the former head of global cyber security company Symantec, to creditors of RGD Group and RGD Constructions Pty Ltd outlined the efforts.
The letter said Mr Clark was the largest creditor of the companies, and was sent ahead of Wednesday's first meeting of creditors since the firm directed by Ron Grabbe was placed into voluntary administration last fortnight.
"His family has a long-term personal relationship with the Grabbe family and it was in the context of this long term personal relationship that Mr Clark became involved with the companies," the letter read.
The letter said based on the long-term relationship, Mr Clark agreed to lend $8.15 million, with an initial amount of $3 million transferred within days.
In a statement confirming the appointment of administrators earlier this month, Mr Grabbe said he was "very appreciative of the personal and financial support received from the Clark family".
Mr Grabbe declined to comment on the matters when contacted on Tuesday.
The letter claimed Mr Clark paid a further $5.202 million in mid-September.
The letter said the loan was, for all practical purposes, unsecured, and the initial $8.15 million had been lent for the "sole purpose of enabling the companies to meet outstanding liabilities to unsecured trade suppliers and subcontractors of the companies".
The letter said without the payment, liabilities to creditors may not have been made on The Rhythm on Beach project at Maroochydore, and the bank, or mezzanine lenders might have been left to finish the project and make the sales.
Mr Clark began to have "serious doubts" about the companies' ability to manage their finances, and he insisted on the appointment of a forensic accountant.
An investigating accountant told Mr Clark there were liabilities to unsecured trade suppliers and subbies of about $10.5 million and the companies had debts of $41.5 million to mezzanine lenders.
Those debts to lenders were incurring interest of 20 per cent, capitalising monthly, and there was also an amount of $20 million owed to a bank lender.
After Mr Clark received this information the letter said it became clear to Mr Clark the "only realistic way" he could secure repayment of money lent to the companies would be to "rescue" the companies and financially support them in undertaking the development of several projects.
It was envisaged the potential profits from the projects would "conceivably be sufficient to repay the original debt and further money lent for the purpose of progressing these projects".
The letter said Mr Clark was able to negotiate with mezzanine lenders to ease the burden of debt and the interest, and on February 25, 2020, Mr Clark tipped in a further $17.225 million.
The liability of the companies to lenders was reduced by $15.225 million, paid in cash by Mr Clark, and $4 million became available to pay unsecured trade suppliers and subbies, paid by Mr Clark and the lender equally.
Further investigations followed, which unearthed other debts previously unknown to Mr Clark totalling $3.5 million.
In early-April the letter said Mr Clark was "rapidly tiring of unpleasant surprises" and formed an intention to withdraw his financial support.
He did so "after a lengthy period of consideration and with a heavy heart".
The letter said Mr Clark paid a further $2.006 million to the companies prior to his funding withdrawal, with $365,000 to cover employee entitlements and the balance to pay unsecured trade creditors and suppliers.
"There has been no phoenixing activity in connection with the current financial difficulties being experienced by the companies and in relation to Mr Clark's support for them," the letter continued.
Between funds paid to repay suppliers and subbies and the debt reduction, Mr Clark had outlaid almost $28 million.
The letter also outlined the Clark family group had acquired some intellectual property from RGD Group, which would be paid for.
Clark Group Constructions Pty Ltd was registered on April 6, with Darryl Clark listed as director, at the same Minyama Island address as Greg Clark.
The letter also revealed the future of two of RGD's major Coast projects.
The Southbank project at Birtinya Island was to be undertaken with a price of $8.8 million to be paid for the project opportunity.
Of that, $5.5 million was paid to mezzanine lenders on February 25, with a further $3.3 million payable within 15 months.
The Southbank project had been valued at about $4 million, based on available evidence.
The Seanna Residences luxury apartment project at Bokarina Beach was also being continued, with $12.7 million paid for the project opportunity.
Of that, $6 million was paid to lenders on February 25, and another $6.7 million was payable by December 31, 2021.
The Seanna project had been valued at $9.9 million in a recent formal valuation.
All employees of the companies had been offered employment opportunities with Clark Group, and liability for all of their employment entitlements had been assumed.
The letter, written by Porter Davies Lawyers principal John Porter, on behalf of Mr Clark, said both Seanna and Southbank projects would be "built by a qualified and experienced builder and to ensure continuity, key members of the project team have been retained".
"Both projects will be high quality projects and will be constructed using local suppliers and subcontractors," the letter said.
"The carrying out of the Seanna and Southbank projects, will provide a significant boost to the Sunshine Coast economy (and to trade suppliers and subcontractors) at a time when that economic boost is very badly needed.
"The Clark Group is directing its attention and energies to a long term future in development on the Sunshine Coast.
"It is securing a pipeline of quality projects into the future. These projects will provide ongoing support for local suppliers and subcontractors and with their assistance, establish the reputation of the Clark Group as an long term quality participant in the development industry in Queensland."
Mr Clark was also giving serious consideration to a deed of company arrangement, to assist unsecured creditors of the companies, although he had no obligation to do so.
"Mr Clark awaits the outcome of the first meeting of creditors of Companies on Wednesday and will give further consideration to the proposal in the light of the outcome of those meetings," the letter said.
"In the circumstances that have transpired, the Clark Group has no financial connection with Mr Grabbe and the Companies into the future."
Mr Porter and Matthew Lawson were directors of Maroochy Urban Renewal Pty Ltd, which had control of The Rhythm project at Maroochydore, as well as RGD Property Group Pty Ltd, a now dormant former company of Mr Grabbe's.
It was understood one or both of those companies were likely to be deregistered in future.
FTI Consulting administrator John Park, who was appointed to the companies, said they were "continuing our work to determine the status of the company's financial position, and will provide creditors an update at the creditor's meeting on May 20".
Mr Park said they would take the letter issued on behalf of Mr Clark "into consideration as we continue our investigations".
Mr Grabbe had previously outlined his intention to work closely with administrators to get the best possible result for creditors.