Liquidation of collapsed developer Privium could ‘recover’ money for hundreds of creditors

The administrators of collapsed Queensland building developer Privium Group have recommended it be liquidated, after finding that the construction group likely traded insolvent between August and November.

FTI Consulting issued a report on Tuesday, detailing the administrators’ findings about the transactions the group made, at what point it became insolvent and the return secured and unsecured creditors can expect to receive.

The administrators’ “preliminary view” is that Privium’s companies were likely insolvent from at least August until the time of their appointment in mid-November.

“Based on the estimated date of insolvency and our current understanding of the companies’ financial affairs, the potential claim for insolvent trading may be of the order of approximately $2.5 million,” the report states.

According to the administrators, however, it’s unclear whether the director and former directors could meet a successful insolvent trading claim, which is an action for a breach of a director’s duty to to prevent insolvent trading from occurring.

Prior to its collapse, Privium Group operated as the head company of eight other entities, including the Privium Pty — formerly known as Privium Homes — which was a housing developer operating in Queensland, NSW and Victoria.

The administrators found that Privium Pty has $24.6 million in total liabilities and estimated that secured creditors could receive a highest possible return of 5 cents on the dollar within six to 12 months. The administrators expect no return for the unsecured creditors.

According to the report, the liquidation of Privium Group and its eight companies could result in property or money being recovered for creditors, which is why they recommend the group is liquidated.

The report follows the appointment of administrators John Park, Joanne Dunn and Kelly-Anne Trenfield on November 17 who will hold a second meeting of creditors on December 22.

More than 2000 individual home-buying customers across Queensland, Victoria and NSW were affected by the collapse of Privium last month, along with hundreds of trades suppliers, contractors and subcontractors.

Privium Group’s director, Robert Harder, said the company collapsed due to the effects of COVID-19 on operations, which blew out lead times in the industry and resulted in restrictions on construction sites in Victoria.

The administrators agreed with the director’s view on why the group collapsed, adding that the costs of construction outpaced revenue growth.

They said higher costs were linked to an increase in the price of input materials and labour costs, influenced by a shortage of skilled labour and global supply chain problems.

SmartCompany has contacted FTI Consulting’s administrators who declined to comment further.