RCR Tomlinson’s creditors have been asked to submit proof of debts to the company’s administrators by Friday ahead of the first creditors’ meeting next week as a second class action firm said it was considering potential claims on behalf of the engineering group’s investors.
John Walker, chief executive officer of Investor Claim Partner, whose class actions include a claim against Dick Smith Holdings, told The Australian Financial Review his firm was investigating potential legal action against RCR and wanted to find out whether its cash flow problems had extended beyond the two Queensland solar farms announced on August 28.
RCR’s board assured investors at the time that it had done a “comprehensive internal investigation” into cost blowouts at its Daydream and Hayman projects, and that measures were being taken to “mitigate the risk” of future cost increases being “undetected”.
It told investors the issues were “project-specific” and raised $100 million to cover the additional costs, including a $57 million writedown on the Queensland solar farms, saying in its equity-raising prospectus that the procurement control issues experienced on the solar farms were “not systemic within RCR”.
RCR’s interim CEO Bruce James told the Financial Review at the time that the two solar farms were the only sites with a “circumvention of our procedures” and that there was “no fraud”.
But three months later RCR went into administration without explaining to investors why it ran out of money.
Litigation firm Quinn Emanuel Urquhart & Sullivan has already filed class action proceedings in the NSW Supreme Court alleging that RCR breached continuous disclosure laws because its senior management team either was aware or should have been aware of the solar farm problems before announcing them to the market on August 28.
RCR administrators McGrathNicol will hold creditor meetings in Sydney, Brisbane, Melbourne and Perth on Monday. It is unclear how many creditors RCR has but subcontractors are owed millions of dollars.
McGrathNicol will not make a recommendation on the future of RCR until the second creditors’ meeting, which is typically held within six weeks of a company falling into administration.
The administrator will consider several options, including whether RCR should be restructured via a deed of company arrangement to keep its non-solar businesses operating.
However, some creditors are expected to push for the company to be forced into liquidation in the belief this will give them more power to investigate RCR’s directors.
McGrathNicol has warned creditors there might be multiple sales of individual business units within the RCR Group.
It has forecast its administration fees will be between $2 million and $5 million, which will be paid out of RCR’s remaining cash.
The administrators this week secured access to $12 million of a $29 million new loan facility provided by RCR’s financiers, led by CBA.
McGrathNicol, whose partners earn up to $690 an hour, has proposed that it be paid in six-minute increments, arguing that it is difficult to estimate how much time it will take to work on RCR’s “large, complex” administration because the company has 41 separate entities.
RCR has dozens of offices in capital and regional cities, as well as offices in New Zealand and south-east Asia.
McGrathNicol has already told RCR’s solar farm clients that it will not take over the company’s fixed-price engineering, procurement and construction contracts, and some people previously working on the nine remaining solar projects have been made redundant.