CEC deferred release of numbers for the seventh time on Friday. No, hang on , I think it's the eighth now? The construction subsidiary is now in voluntary administration pending a proposed employee buy out. The full text of the CEC announcement is below:
ASX Announcement and Media Release 6 May 2011
As part of the ongoing restructuring of CEC Group and its operations, the Board of the CEC Group announced today that it was placing the one of the group’s construction company’s into voluntary administration. That company is CEC Constructions Pty Ltd. The Board found it necessary to take this action as pressure from a handful of creditors and the principal financier reaches a critical level.
At this stage the voluntary appointment of an external administrator is considered a responsible course of action by the board. The appointment of a Voluntary Administrator gives the company the ability to finalise some of the transactions we have been working on to overcome the debt issues the company faces within the framework provided for by the Corporations Act.
The administrator’s appointed are Mr Terry van der Velde and Mr David Stimpson of SV Partners in Brisbane.
It may be necessary to take similar action with certain other subsidiaries, especially those that have ceased trading.
The employees of CEC Constructions Pty Ltd along with employees of other subsidiaries wish to participate in the buyout of the construction businesses. The possibility of this buyout is being strongly supported by the Federal Government’s sponsored Australian Employee Buyout Centre (‘AEBC’), a centre under the Department of Education, Employment and Workplace Relations. AEBC is a recent creation set up to aid employee buyouts of struggling businesses affected by the global financial crisis (‘GFC’).
An overwhelming majority of employees (over 90% have signed up) wish to participate in the buyout of the operational construction businesses of the CEC Group.
Further a major bank has expressed interest in supporting the employee buyout and the opportunity will be advanced hastily.
The employee group have now put a preliminary letter of interest to the Board of CEC Group and this is under consideration.
Certain relevant managers and consultants have agreed to assist the employees in establishing the buyout on the basis of fees only upon success.
CEC Constructions Pty Ltd is in a precarious financial position and the prospect of employees taking a position to help assure their employment in the region is very welcome.
While unemployment in the Cairns and Far North Queensland region is amongst the highest in Australia, perversely the considerable reconstruction activities in the region are being awarded to companies from outside the region. It is commendable that employees wish to personally fight against this trend and fight for their own employment.
Aside from the considerable reconstruction activities in the region, other opportunities include mining infrastructure works and various projects in PNG.
In the alternative, the directors continue to advance possible funding being available to completely re‐finance the CEC Group’s operations. Clearly a refinancing package of this size and nature takes time to negotiate and to put in place but the process has been underway for some time now.
Despite the need to take this action, placing CEC Constructions Pty Ltd in Voluntary Administration will further expose the whole Group to potential enforcement action by the principal financier.
CEC Group has provided explanations and analysis to the current bank to demonstrate that the restructure (including the voluntary administrations of the construction company) potentially creates the most favourable result for the bank, not to mention other interested parties ie: creditors, employees, shareholders and the community.
Since the GFC, CEC Group has paid the principal financier around $104 million in principal repayments and in excess of $20 million in interest and other charges, consequently reducing the debt to the bank from $168 million to $64 million. At the same time many other loans have been almost eliminated. Given the achievement of this debt reduction the CEC Group is certain that the bank will properly consider the potential results from the restructure and cooperate to ensure the best result for the bank, creditors, employees, shareholders and the community.
The December 2010 accounts of CEC Group will be lodged shortly and it is envisaged that the shares of the Group will be trading soon after. The Board is concerned of the risk of imminent enforcement action by the bank or a creditor on the Group as a whole and all investors (existing and potential) should make themselves aware of that possibility.
The continued patience and cooperation in the short term of the bank, Australian Taxation Office, State Revenue Office (Qld), and creditors is required to successfully achieve the reconstruction and in turn achieve the best result for all of these interested parties.ENDS
Construction Subsidiary to go into Voluntary Administrationand Employee Buyout