Burswood-based company Western Work Force is set to emerge from administration in highly unusual circumstances, with its largest creditor opposed to its recapitalisation, its founder and major shareholder in police custody, but its core business continuing to grow.
Burswood-based company Western Work Force is set to emerge from administration in highly unusual circumstances, with its largest creditor opposed to its recapitalisation, its founder and major shareholder in police custody, but its core business continuing to grow.
The two-year-old business was placed into administration in September, nine months after Western Work Force provided financial assistance to its then chief executive Craig Loftus to substantially increase his shareholding.
That move came at a time of rapid expansion, with the business turning over $11.5 million in its first year and $25.7 million in its second year.
The company has continued to defy the downturn in mining construction activity; it had 127 staff on contract when it was placed into administration and currently has about 200, after supplying workers for three shutdown projects.
Western Work Force has continued as a going concern only after its administrator, Auxilium Partners’ Bob Jacobs, used his casting vote to break a deadlock at a creditors’ meeting held in December.
The deadlock arose after the Australian Taxation Office, owed $3.5 million by the business, voted against a deed of company arrangement (DOCA) while every other unsecured creditor – numbering 26, and collectively owed $474,000 – voted in favour.
An unusual aspect of the DOCA was that the payout to creditors depended on how much they were owed.
It proposed that creditors owed less than $10,000 get 100 cents in the dollar while the return to large creditors was estimated to be 22 cents in the dollar.
Mr Jacobs told Business News the good performance of the business meant that was likely to be 35 cents to 40 cents in the dollar.
The DOCA will enable two of the original investors in the business to regain control, less than a year after they sold their shares at a big premium to the current valuation.
Melbourne-based Daniel Bramhall, whose business interests include Go Workplace Training, his business partner Dean Lewington (along with a third investor, Melinda Goldsworthy) will contribute $404,000 to a creditors trust to secure control of the business.
They are due to become directors of the company.
Mr Bramhall's Perth-based brother, David, has a small shareholding but will not become a director.
Implementation of the DOCA has been delayed because one crucial precondition – the transfer by Mr Loftus of his shares to the investors – has not been satisfied.
With Mr Loftus in custody and facing unrelated drugs charges, Mr Jacobs is planning to seek a court order to enforce the transfer.
Mr Loftus was a founding shareholder of Western Work Force but acquired the bulk of his shares in December 2015, when he bought out most of the shareholders in it and related company, Skyline Scaffolding & Shoring.
General manager Ryan Beaven-Davis also bought extra shares last December, and has already transferred them.
The two men spent $2.45 million on these share purchases and most of the money came from Western Work Force, which provided $1.8 million of financial assistance.
In a report to creditors, Mr Jacobs said that when Western Work Force provided the financial assistance it owed the tax office $1.8 million and had experienced difficulties meeting its PAYG and GST obligations.
He noted that a liquidator (if appointed) would be required to investigate this transaction to determine whether it should be overturned and the funds returned to the company.
Mr Bramhall told Business News the business was in excellent shape when he sold out, with turnover of $12.1 million and a net profit of $1.2 million in the four months to October 2015.
“I didn’t want to sell,” he said.
“It was an extremely good business. Craig wanted to take the business in a different direction, he was looking overseas and an ASX listing.”
Mr Bramhall said cash flow projections submitted to ASIC showed the company could afford to lend the $1.8 million and suggested its financial problems arose after the change of ownership.
Mr Jacobs said although the company may have appeared as if it was trading well, its liabilities exceeded its assets by nearly $2 million when it went into administration.
Adding more spice to the company‘s recent history was the identity of the people behind two alternative proposals.
Colourful Sydney businessman and former bankrupt Jim Byrnes represented Swissco Asia Pacific Investment Fund, which presented a competing DOCA.
Former heavyweight boxing champion Adam Forsyth, who served two years in jail for giving false or misleading evidence to the Australian Crime Commission, represented Goldstaff Holdings, which put forward a proposal to buy the business.
Mr Jacobs said he favoured the Bramhall DOCA as it was more advanced, had already been reviewed by his solicitors, and would deliver a faster return to creditors. It also preserved the jobs of staff and contractors.
He noted that the state government’s Office of State Revenue, which was owed $170,544, voted in favour of the Bramhall DOCA “indicating there are other factors to consider than whether the monetary return is greater”.
An ATO spokesperson told Business News it could not comment on the tax affairs of any individual or entity due to its confidentiality obligations.
In a statement to Business News, Mr Bramhall said: “Western Work Force was and still is an amazing business in Western Australia that is why the founding shareholders are excited to be involved again."
"This company has an amazing culture with extremely hard working and passionate employees which is directly reflected in the continued exponential growth of the company in difficult economic times.”
