Forge Group Limited (Administrators Appointed) (Receivers and Managers Appointed) And certain Subsidiaries (Referred to as “the Group”)
Concurrent First Meetings of Creditors
Friday 21 February 2014
Introduction
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Appointment of Administrators
Martin Jones, Andrew Saker and Ben Johnson of Ferrier Hodgson were appointed as
Joint and Several Administrators of the following entities on 11 February 2014:
Appointment of Receivers and Managers
Mark Mentha and Scott Langdon of KordaMentha were also appointed Receivers and
Managers of the following main trading entities on 11 February 2014:
Company ACN
Forge Group Ltd 065 464 226
Alanthus Nominees Pty Ltd 112 996 746
Energy Maintenance Partners Pty Ltd 147 111 215
Forge Group Asset Management Pty Ltd 161 511 486
Forge Group Construction Pty Ltd 114 897 728
Forge Group Minerals & Resources Ltd 113 740 211
Forge Group Power Pty Ltd 103 678 324
Forge International Pty Ltd 128 522 305
Cimeco Pty Ltd 161 511 477
CTEC Pty Ltd 161 511 468
Abesque Engineering Pty Ltd 161 511 931
Introduction
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The Receivers and Managers role is to secure and realise the property captured by the secured
creditors’ charges. This includes debtors, contracts, plant and equipment and security bonds.
The Receivers and Managers are currently negotiating to complete the Diamantina Power Station
contract in Australia and realise the Group’s interest in international investments which are not
subject to the receivership or administration, but fall within the Receivers and Managers’ control
by virtue of the entities shares being held by one of the above entities.
Please note that the USA and West African foreign entities are not in any formal
administration and are stand alone businesses that have not been effected by our
Appointment.
Company ACN
Forge Group Ltd 065 464 226
Forge Group Asset Management Pty Ltd 161 511 486
Forge Group Construction Pty Ltd 114 897 728
Forge Group Minerals & Resources Ltd 113 740 211
Forge Group Power Pty Ltd 103 678 324
Forge International Pty Ltd 128 522 305
Introduction
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Concurrent Meetings
The legal position is that there are in fact eleven (11) meetings being held concurrently today. For
the purposes of any resolutions, I propose that the following will apply:
The following entities are parties to a Deed of Cross Guarantee (DXG):
1. Forge Group Limited
2. Forge Group Construction Pty Ltd
3. Forge Group Power Pty Ltd
4. Forge Group Minerals & Resources Ltd
The effect of the DXG is that in the event of liquidation of any or all of the entities, the assets and
liabilities are effectively pooled. As such for the purposes of today’s meeting, and where
resolutions are proposed for any of the DXG Entities, I will not be seeking separate resolutions for
each entity, but rather one joint resolution for all four entities above.
Introduction
Forge Group- First Meeting of Creditors
Page 5
In relation to the other seven (7) entities which the Administrators are appointed over and are not
subject to the DXG,
1. Alanthus Nominess Pty Ltd
2. Abesque Engineering Pty Ltd
3. Cimeco Pty Ltd
4. CTEC Pty Ltd
5. Energy Maintenance Partners Pty Ltd
6. Forge Group Asset Management Pty Ltd
7. Forge International Pty Ltd
each resolution proposed today will need to be passed in respect of each non DXG entity, and
each creditor will be given the opportunity to vote in relation to the company for which they have
a claim against.
Housekeeping
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Please turn of all mobile phones during the meeting
Media is asked to leave
Please hold all questions until the end of the meeting
When asking a question, please wait for a microphone attendant before directing
your question to the Chairman
Introduction of Meetings
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Meetings to be held concurrently
Notice calling the meeting
Admission of proxies
Amount admitted- voting purposes only
Determination of quorum
Voting and resolutions
Motions, Resolutions and Casting Vote
Conduct of Meetings
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Purpose of Meetings
The main purpose of the concurrent meetings of creditors today is:
For creditors to resolve pursuant to Section 436E(1) of the Act:
Whether to appoint a Committee of Creditors and;
If so, who are to be the committees members
AND
For creditors to resolve pursuant to Section 436E(4) of the Act that:
to remove the Administrator from office; and
to appoint someone else as the Administrator of the company.
Declaration of Independence, Relationships and Indemnities
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Pursuant to Sections 436DA(2) and (3) of the Act and the ARITA Code of Professional
Practice, the Administrators’ enclosed a copy of the Administrators’ Declaration of
Independence, Relevant Relationships and Indemnities (DIRRI) for the Group in the
circular to creditors dated 12 February 2014.
In the DIRRI, we noted that:
“We, Martin Jones, Andrew Saker and Ben Johnson of Ferrier Hodgson have undertaken
a proper assessment of the risks prior to accepting the appointment as Administrators
of The Group in accordance with the Corporations Act 2001 (Cth) (the Act), the
Australian Restructuring Insolvency & Turnaround Association (ARITA) Code of
Professional Practice (the Code) and applicable professional standards. This assessment
identified no real or potential risks to our independence. We are not aware of any
reasons that would prevent us from accepting this appointment.”
The Voluntary Administration (“VA”) Process
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The Voluntary Administration process allows a company time (up to 25 business
days) to either:
Restructure its affairs and continue in existence where such will provide a
better return for the company’s creditors than an immediate winding up; or
Provide a mechanism for an orderly winding up of the company where it is not
possible for the business to continue.
The ultimate outcome of the VA process is either the restructure of the company
through a deed of company arrangement or the liquidation of the company.
Creditors may also decide to adjourn the second meeting for a period of up to 45
business days.
Voluntary Administration Process Cont.
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Administration
should end
Liquidation
Deed of
Company
Arrangement
Administrators
First meeting
of creditors Held 21 February 2014
Second meeting
of creditors To Be Held 18 March 2014
OR OR
Report to
creditors To Be Issued 7 March 2014
Group Overview
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Forge Group was a contracting business with the following key business units:
Forge Group North America
In June 2013 Forge acquired Taggart Global, a world leader in asset
management, engineering and EPC across the minerals processing and
materials handling sector. (600 people in Nth America, South Africa and China)
Forge Group Africa
Provides comprehensive engineering, procurement and construction services to
the energy and resources sector in Africa. Contributed $57.4m in revenue
Forge Group Minerals and Resources
Provides engineering design and construction services for the mining and
metals sector in Australia.
Group Overview
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Forge Group Power
Specialises in combined and open cycle configuration gas turbine power plants.
The business unit was acquired from CTEC in January 2012. Contributed nearly
50% of Group Revenue ($494m).
Forge Group Construction
Design, construction and fabrication including heavy civil, structural,
mechanical, piping, tanks, electrical and building. Contributed $607m in
revenue.
Forge Group Asset Management
Comprehensive operations, managed maintenance services and sustaining
capital works. Contributed $14m in revenue.
Other Key Points
Had over 2,220 people working for it, over 8 countries and had a net after tax
profit of $63m for the year ending 30 June 2013
Forge Group Ltd
ABN: 58 065 464 226
Directors: David Craig, David Simpson,
John O’Connor, Gregory Kempton,
Julie Beeby, Grahame White
Co Sec: Glen Smith
Forge Group
Construction Pty Ltd
ABN: 44 114 897 728
Directors: David Simpson,
Donald Montgomery, Mark
Rankmore
Co Sec: Glen Smith
Forge Group Minerals
and Resources Ltd
ABN: 75 113 740 211
Directors: David Simpson,
Donald Montgomery, Mark
Rankmore
Co Sec: Glen Smith
Forge Group Asset
Management Pty Ltd
ABN: 36 161 511 486
Directors: David Simpson,
Donald Montgomery, Mark
Rankmore
Co Sec: Glen Smith
Forge International
Pty Ltd
ABN: 44 114 897 728
Directors: David Simpson,
Donald Montgomery, Mark
Rankmore
Co Sec: Glen Smith
Alanthus Nominees
Pty Ltd
ABN: 66 112 996 746
Directors: David Simpson,
Donald Montgomery, Mark
Rankmore
Co Sec: Glen Smith
Forge Group Power
Pty Ltd
ABN: 41 103 678 324
Directors: David Simpson,
Donald Montgomery, Mark
Rankmore
Co Sec: Glen Smith
Energy Maintenance
Partners Pty Ltd
ABN 147 111 215
Directors: David Simpson,
Donald
Montgomery,
Mark Rankmore
Co Sec: Glen Smith
Receivers and Managers
Appointed
Administrators Appointed
West African
Foreign Entities
Note:
The following dormant companies are 100% owned by Forge Group Ltd and created to
protect business/trading names:
Cimeco Pty Ltd (ACN 161 511 477), CTEC Pty Ltd (ACN 161 511 468), Abesque
Engineering Pty Ltd (ACN 161 511 931)
Directors: David Simpson, Donald Montgomery, Mark Rankmore
Co Sec: Glen Smith
Taggart &
Other Foreign
Entities
Group Overview
Events Leading to Appointment
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June 2013
Sept 2013
Oct 2013
11 Nov 2013
18 Nov 2013 28 Nov 2013 29 Jan 2014
• FGL acquires Taggart
Global, a US based
Asset Management,
Engineering and EPC
business for
$43million.
• Announcement of a
$1.47 Billion joint
venture contract in
partnership with
Spanish engineering
firm Duro Felguera.
• The contract is valued
at $830 million for FGL,
and represents Forge’s
largest contract to
date, and increases
FGL’s order book value
to $2.1 Billion.
• FGL request an
extension to the
voluntary suspension
in trading, advising
that it does not have
sufficient certainty
regarding its projects
and ongoing
financing to make an
announcement to the
market.
As summary of the key ASX announcements made by the Forge Group are listed below:
• Announcement that FGL had
secured $50 million in asset
management contracts in
North America and Australia
Since 1 June 2013.
Aug 2013
• Release of 2013 Annual
Report showing a net
profit after tax of $63
million and total equity of
$213.5 million.
• FGL Announce:
• ANZ continue to provide
support for the
Company.
• FGL are looking at a
potential equity capital
raising.
• The underperforming
assets of the Company
(DPS & WAPS) had been
quarantined from
normal business
operations, with all
other parts of the
business trading as
normal.
• Forge had entered into
negotiated agreements,
with the Customer and
sub-contractors to
identify commercial
issues and extend
scheduled completion
dates
• $127 Million profit
write down in FY2014
associated with the
Diamantina Power
Station and West
Angelas power Station
projects;
• $45 million net cash
outlay required to
complete both
projects;
• ANZ has agreed to
provide further
support to Forge
Group through new
facilities and certain
amendments to
existing debt
facilities;
• The ANZ debt
facilities amendments
will provide sufficient
facilities to cover the
liquidity challenges
and strengthen Forge
Group’s balance
sheet;.
• FGL announce a pro-forma
FY2014 EBITDA loss
expected to be between
$20 million to $25 million.
• FGL qualified this by
confirming that they had
continued financing support
from the ANZ.
11 Feb 2014
• Administrators and
Receivers and Managers
Appointed
Key Tasks Completed since our Appointment
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The Receivers and Managers are now in control of the affairs of the trading entities, and
accordingly, our role as Joint and Several Administrators is largely subordinated to the decisions
made by the Receivers and Managers. Our key tasks have included:
Notification of appointment and first meeting to creditors and employees of the Group.
Statutory Notifications.
Liaised with the Receivers and Managers with respect to various creditor and employee
queries of the Group.
Liaised with management in relation to the provision of information to complete our
investigations and discussions in relation of same.
Collection of books and records and assistance with Forensic Backup of Servers and key
computers.
Commenced section 439A Report to Creditors and Investigations.
Convening of first creditors meeting.
Key Stakeholders- Employees
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Employee Entitlements receive a priority under the Act which means employee entitlements rank ahead of ordinary
unsecured creditors and ahead of secured creditors, but only with respect to circulating or floating charge assets.
Currently, we are unable to form a view if there will be sufficient floating charge assets to meet these entitlements.
The Receivers and Managers will be realising the floating charge assets.
There were approximately 1,622 Employees that were split between the entities as follows:
In relation to employees that have been made redundant, we note the following:
We are working with the Receivers and Managers, Payroll and HR of Forge to issue employees with a separation
letter. Employees should contact Forge HR to obtain a separation letter.
We have requested Payroll and HR of Forge to commence calculation of employee entitlements. Given the
number of employees terminated this will take some time to calculate.
Entity Number RetainedResigned /
Redundant
Forge Group Limited 143 26 117
Forge Group Pow er 102 21 81
Forge Group Construction 1,254 41 1,213
Forge Group Asset Mangement 53 - 53
Forge Group Mineral and Resources 70 2 68
Total 1622 90 1532
Key Stakeholders- Employees
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We have contacted the key unions (CFMEU, AMU, AFMEU and CEPU) to advise them of our
appointment and will continue to liaise and work with them in ensuring employee
entitlements are calculated and paid as soon as practically possible.
We have contacted the Federal Government’s Fair Entitlements Guarantee (FEG) to advise
of our appointment and assign a case officer(s) to assist in the lodgment of claims in the
event the Group is placed into Liquidation.
FEG is a government body which compensates employees of entities which are placed into
Liquidation and are unable to pay employee entitlements in full.
Further information on FEG was included within our circular to employees and should the
entities be placed into Liquidation, we will update employees as the FEG process progresses.
Key Stakeholders- Unsecured Creditors
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Unsecured Creditors of the Group include:
Insurance bond facilities provided.
Trade creditors who supply goods, equipment or services.
Equipment Financers / Lessors with respect to any shortfall.
Any liquidated damages from customers resulting from the termination of contracts.
Creditors claims are “frozen”, or subject to a statutory moratorium during the administration
process with payment being postponed to the outcome of the second meeting of creditors.
Given the appointment of the Receivers and Managers to the trading entities of the Group, any
queries relating to:
The continuance of good and services provided to the one contract still on foot;
The assessment of your retention of title / PPSA claims; and
Collection of goods / equipment supplied,
should be directed to Korda Mentha in the first instance.
Directors
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Pursuant to section 437C of the Act, officers of a Company under administration cannot
perform or exercise, and must not purport to perform or exercise, a function or power as
a company officer, except with the Administrators’ written approval.
Pursuant to section 438B(2) of the Act, Directors are required to submit to us, within five
(5) business days, a statement about the Group's business, property, affairs and financial
circumstances.
The directors have requested an extension of four (4) weeks to complete the Report as to
Affairs of the Group for the following key reasons:
The complexity and size of the Group.
They do not have access to the Group’s financial records, IT systems or finance
teams.
The Administrators have granted the Directors of the Group the extension requested.
Snapshot of Creditors Position
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A snapshot of the Group’s creditor position, based on draft unaudited management accounts as at
31 January 2014 and information provided by the Group may be summarised as follows:
Please note that these numbers will be subject to change, and specifically:
Calculation of employee entitlements relation to termination.
The receipt and adjudication of creditor claims and the crystallisation of liquidated damages
from customer claims for failure to complete contracts.
Creditor Group NumberBook Value
$ 000'Notes
Secured / Asset Backed
Club Bank Facility 1 289,393 Includes Finance Facilities and Bank Guarantees
Hire Purchase Liabilities 4 24,686 Subject to asset security
Insurance Bond Facilities 5 217,875 Exposure subject to resolution of contract claims
Priority
Employees 1,622 15,544 Excludes Notice and Redundancy
Unsecured
Trade Creditors 1,207 48,776 Subject to lodgment and adjudication of claims
Other Provisions / Accruals Unknow n 189,330 Predominately Relates to goods and services provided but not invoiced and income received in advance
Tax Liabilities 1 15,963 Subject to lodgment and adjudication of claims
Customer Liquidated Damages Unknow n Unknow n
Total 2,840 801,567
The Next Steps- s439A Report to Creditors
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The Second Meeting of creditors will be convened on the 18 March 2014 (unless extended by the
court), at which time creditors will determine the future of the company, which will be:
a. Company to be wound up;
b. Company to execute a Deed of Company Arrangement
c. Administration to end (should the Company be solvent).
Creditors may also adjourn the second meeting for up to 45 business days.
Prior to the second creditors meeting, the Administrators are required to complete a section 439A
Report and provide to creditors for their consideration.
This report will focus on the following key areas:
Analysis of the Financial Position of the Group, both current and historical.
History of the Group.
Preliminary Statement of Position and estimated returns to creditors.
Causes of Failure.
Investigations and potential recoveries in a liquidation.
Creditors’ Options and Administrators’ Recommendation .
The Next Steps- Statutory Investigations
Section 438A requires the Administrators’ to undertake statutory investigations into, the
business, property, affairs and financial circumstances surrounding the Group.
The purpose of the investigations is to form an opinion about whether it’s in the best interest of
creditors to either:
Execute a Deed of Company Arrangement;
Place the respective entity into Liquidation
For the Administration to end
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The Next Steps- Statutory Investigations
These investigations which will be outlined in our Administrators’ Report pursuant to Section
439A of the Act will be preliminary in nature, given the limited time available to fully consider
all of the issues.
The key areas of focus are:
Preliminary financial analysis as to the trading performance and likely causes of failure of
the Group.
Preliminary assessment as to the likely date of insolvency of the Group.
Director related transactions (Incl director bonuses).
Acquisition of CTEC.
Preliminary assessment as to the breaches of director duties.
We understand from news reports that litigation funder Bentham IMF has announced that it will
attempt to fund a shareholders class action against the Forge Group.
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Questions and Discussions
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All questions to be directed to Chairman.
When asking a question, please clearly state your name and the name of
the company or creditor you represent.
Resolutions
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The first matter that is required to be addressed by the meeting is
whether or not to appoint a Committee of Creditors.
As outlined earlier creditors are required to consider and resolve
whether pursuant to Section 436E(1) of the Corporations Act 2001:
i. To appoint a Committee of Creditors; and
ii. If so, who are to be the members of the Committee.
Role of Committee of Creditors
Specific to companies
Consult with and receive reports from the Administrators
Assist the Administrators as a “sounding board” for any proposals
Approve the Administrators’ remuneration
Resolutions (cont.)
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The second matter for creditors to resolve pursuant to Section 436E(4) of
the Act is (if an alternate Administrator has been nominated and has
consented to act) whether or not:
i. To remove the Administrators from office; and
ii. To appoint someone else as the Administrator of the Company.
No nominations for an alternate administrator have been received
Close of Meeting
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Thank you for your attendance
Any further queries may be directed to the Administrators’ office or to our staff at the end of the meeting.
Our contact details are below:
Ferrier Hodgson
Level 28, 108 St Georges Terrace
Perth, WA 6000
Telephone: (08) 9214 1485
Facsimile: (08) 9214 1400
Email: [email protected]