Receiver checks in on grim day for Hartner hotel project

By ELLEN READ and JOSIE CLARKE

Lean months are ahead for the hundreds of subcontractors caught in the fallout from the collapse of Hartner Construction.

New Zealand's fourth-largest building firm, which is constructing the $50 million Hilton Hotel on Princes Wharf, has gone into receivership, leaving scores of firms in jeopardy.

The Hilton is six months behind schedule, but general manager John Ingram said yesterday that he still expected the hotel to open in mid-April.

Two floors were already finished and the remaining five were just weeks away from completion, he said.

But subcontractors are reluctant to return and a bid to liquidate the company is underway.

Darrell McLeod, managing director of subcontractor Chenery Plumbing, said the collapse was not unexpected but would still send a "cascade" of subcontractors out of business.

"Especially those who put all their eggs in one basket. They end up getting locked in and I think they're kidding themselves that it's all going to work out all right."

Some subcontractors' families would find the coming months very tough, Mr McLeod said.

Chenery Plumbing, knowing that Hartner might collapse, had demanded payments every two weeks during its work on the Hilton.

There was standing room only at the Tamaki Yacht Club yesterday as 200 creditors demanded to know if they would get any money.

John Waller, a partner with receivers PricewaterhouseCoopers, told them Hartner's directors had requested that Hartner Construction and Hartner Group go into receivership as they had reached their funding limit with the bank and had no other option.

The cause was $13 million of disputed claims, the cost of fighting these claims, some unprofitable contracts and a downturn in the construction industry.

Mr Waller stressed that the company was in receivership, not liquidation, and said that over the next few days he would review all contracts with the aim of completing them.

He would not give any guarantees but pledged to do his utmost to resolve the situation, despite admitting there would be a shortfall to secured creditors.

"The key is that we are trying to get all the sites going," Mr Waller said, adding that this would maximise payouts.

All contractors should obtain a receiver's guarantee before returning to work, as this would ensure payment for future work.

He hoped the bank would extend Hartner's overdraft to allow this. No bank representatives were at the meeting.

Wayne Hartner told the meeting that he had been totally committed to his business over the past 30 years and the prudent thing to do was to call in the receivers.

He said it came as a shock because there were cases pending that he believed he was close to winning.

"We believe we can trade through with the receivers and trade our way out of this."

Mr Waller said he supported Mr Hartner "100 per cent but we've got to look at the facts."

Many subcontractors spoke at the meeting. One asked if anyone felt like returning to work to finish the Princes Wharf project. This was met with silence.

After the meeting, Mr Hartner told the Weekend Herald he was reasonably confident that work underway would be completed.

"I thought the tone of the meeting was reasonable. I'm hoping for support from the subcontractors so we can carry on with the jobs," he said.

Mike Bakker, managing director of Allendale Electrical, which is owed $300,000 plus GST, did not believe that Hartner Construction could trade its way out of trouble.

Scott Pearson, of Scotty Construction, agreed. His company has worked on Princes Wharf and the university and is owed $80,000. He hoped to get some of it, but was unsure if his company would go back to work on the sites.

"Hopefully we'll be okay but we've worked on them for 18 months and that's basically our profit gone.

"I know some good friends of mine who are absolutely screwed. Their debts are three times mine," he said.

"Everyone tightens their belts. Contractors will stop working on a monthly basis, they'll start asking for fortnightly payment, and basically other companies around can't afford to trade that way."

Bernard Montgomerie, of Montgomerie and Associates, acting for Alotech, said he spoke to numerous contractors after the meeting, asking them to join the bid to put Hartner's into liquidation.

"And the mood of them seems to be, why should they help the receiver to repay the bank because they can all see there's no money left there for unsecured creditors."

Mr Montgomerie said he would be in court during the week beginning February 12 with a hearing for the winding up of Hartner Construction, and expected to win it.

"I got an admission from the receiver [in the meeting] that they'll be a shortfall to unsecured creditors."

He said assets totalled $16 million, including $13 million Hartner was owed, some of which was disputed. Creditors were owed $17 million, leaving at least a $1 million shortfall.

Mr Waller said he would oppose the liquidation proceedings.