Fallout from Reed Construction folding continues with collapse of air-conditioning company

A Sydney-based air conditioning installation and servicing company has collapsed, with millions of dollars of debt accumulated following the failure of the now collapsed builder Reed Construction.

Advanced AirCon offers premium air conditioning system solutions to the residential and commercial market and it represents brands such as Actron, Mitsubishi and Panasonic.

The business, which provides services including design, sales, installation, commissioning and servicing, ran into trouble when Reed Construction collapsed in mid-2012 with debts on $182.1 million.

When Reed Construction collapsed, Brian Parker from the Construction, Forestry, Mining and Energy Union told SmartCompany up to 500 Australian small businesses working as subcontractors were “looking down the gun barrel of falling into liquidation”.

“We have a substantial amount of workers with these subcontractors who will be put on the dole queues,” Parker said.

In July 2012, it was revealed trade creditors and subcontractors were owed $78.7 million.

David Iannuzzi and Murray Godfrey from RMG Partners Business Solutions were appointed as administrators to Advanced AirCon last week, with Godfrey telling SmartCompany the business encountered cashflow problems, partly as a result of Reed Construction’s collapse.

“It’s also had difficulties with securing funding from banks and other construction companies. The business has been caught between a rock and a hard place.

“It’s been battling paying taxes for some time and the Australian Taxation Office became quite insistent about being paid,” Godfrey says.

RMG Partners Business Solutions insolvency manager Adam Lysle told SmartCompany the total amount of debt is yet to be determined; however, early investigations have revealed creditors are owed a couple of million dollars, “depending on how the tax office qualify the final debt”.

“There are some unlodged returns out there the Tax Office still needs to consider.

“There are other creditors, although the Tax Office has been the most aggressive,” Lysle says.

In March, a winding up application for Advanced AirCon was filed in the New South Wales Federal Court by the NSW Workers Compensation Nominal Insurer (trading as NSW WorkCover Scheme).

Advanced AirCon later met the requirements of NSW WorkCover and it dropped the order, but it was quickly picked up by the ATO.

In April, the deputy commissioner of taxation became the “substituted plaintiff”, taking over the winding up order.

Lysle says Advanced AirCon has been “belted over the head” by the ATO.

At this stage there are 30 employees with Advanced AirCon and these employees will be retained for the “foreseeable future”, but the directors will be seeking new work.

Godfrey says the administrators are looking to establish licence agreements which will allow most of the contracts to be completed and retention money recovered with the completion of the projects.

“We’ve spoken with the head contractors and they have been positive to date. The main issue is with getting subcontractors and employees paid.

“The interesting situation is there are no secured creditors and no major banks involved. There are some smaller suppliers and they have provided support for the process moving forward,” Godfrey says.

The first meeting of creditors is set to be held on June 27 and Godfrey says creditors will be updated further at this meeting.