Corporate rescue plan sees creditors paid in full (with interest!)

When Pilbara-based Eastern Guruma contracting company – whose clients include Fortescue Metals Group and Rio Tinto – was placed into Voluntary Administration in late 2017, one of the Administrators, Kim Strickland, a Partner with WA Insolvency Solutions (WAIS), Jirsch Sutherland’s WA arm, said he was confident the company could trade its way out of its financial difficulties.

Fast forward 15 months and unsecured creditors of the indigenous civil and mining contractor, which was founded by three female traditional owners, have recently received their third and final dividend. It means they’ve been paid 100 cents in the dollar – plus interest on top. Approximately $4.1 million was paid to creditors, plus $207,000 in interest at a rate of 5 per cent.

“This was an exceptional outcome,” explains Joint Administrator, WAIS Partner David Hurt. “We went from Voluntary Administration to a Deed of Company Arrangement (DOCA), which enabled Eastern Guruma to pay 100 cents in the dollar along with five per cent interest in just over 12 months.

“It’s an excellent example of the Voluntary Administration/DOCA process performing as it is designed to do.

“This process effectively quarantined the liabilities so that the management team could focus on the internal restructuring and capitalisation of the business. It also meant they could continue to operate profitably under the DOCA, enabling the creditor payments and enabling the company to continue to employ 100 staff including contractors, many of whom are indigenous to the Pilbara area.”

WAIS ensures ongoing career development for indigenous communities

Established in 2004, Eastern Guruma has developed a successful business delivering projects for major clients within the Western Australian resources industry. Long-term partnerships with Tier 1 contractors have cemented a strong, independent and professional Aboriginal business with a range of civil and mining capabilities.

After suffering substantial losses on a couple of resources projects – and getting caught up in the collapse of joint venture partner Brierty, leaving it with a claim of about $350,000 –Eastern Guruma was in need of WAIS’ corporate rescue plan.

“People often think a DOCA is never going to work, but this case showed it can and does,” says David. “We were very happy with the outcome.”