The board had convened on August 25 for its meeting and the board packs showed the company’s financials were in dire straits.

That left Gooding with little choice but to phone for help.

Not long after that KPMG accountants were looking over the book and in early spring KPMG’s Matthew Woods, Hayden Leigh and Clint Joseph were appointed administrators of Brierty Limited.

That Brierty went into administration was little surprise given its well-publicised difficulties.

However, things may have been worse than first thought.

In their report to creditors the administrators suggest the company could have been trading while insolvent since May 16, a view hotly disputed by Brierty’s directors.

The administrators expect employees who are priority creditors will receive 60c in the dollar with the balance claimable against the federal government’s Fair Entitlements Guarantee.

They also expect secured creditors will face a shortfall and they cannot determine how much unsecured creditors will receive.

Views differ on what exactly befell Brierty, however, it is clear the company had been struggling for at least two years.

According to the directors it was a delay from the Commonwealth Bank of Australia in approving a finance package Brierty was negotiating with CBA subsidiary BankWest that caused the problems.

Discussions over the funding had been held in early April.

“The company had reasonable grounds for believing the proposal would be approved by CBA as it had the support of BankWest’s senior executives in Perth,” Brierty’s directors say.

‘It was originally anticipated that a CBA decision would be made within a short period of time. 

“As a result the company requested and was granted a trading halt with ASX on April 18 in relation to trading in its securities pending the decision on additional bank funding.

“However, CBA did not make a decision within the anticipated timeframe – indeed, a decision was not made on the additional funding until June 23.

“As a result the company considered it had no alternative but to enter into a voluntary period of suspension of its securities on the ASX from April 19, which continued until June 23.”

This delay, the directors say, led to Brierty’s creditors becoming “more demanding” regarding repayment.

“Some creditors issued statutory demands which were paid, others refused to attend site without payment of arrears, while others were approached by the company and payment plan terms were agreed,” they said.

During this period Brierty was also suspended by Rio Tinto Iron Ore from work it had been doing on the $300 million Western Turner Syncline Stage 2 contract it was working on over safety issues.

The BankWest funding was conditional on work resuming at Western Turner Syncline, which it did on July 17.

The directors insist that during the period from April until BankWest’s provision of additional funding in mid-July the board and executive management were closely scrutinising the company’s cash flow position and cash forecasts.

However, when they received the August board pack, which contained the financial results for July, on August 24, it became apparent “there had been a sudden and sharp decline” in the company’s forecast cash flow.

During the next day’s board meeting Gooding phoned Woods to request an independent assessment of the cash flow position be urgently done. That led to KPMG administrators taking control of the business on September 6.

After poring over the books, the administrators have a different view of what occurred.

They say the company’s problems started in 2015 on the North West Coastal Highway project, which resulted in a $27.3 million loss to the company.

However, while that was the big ticket item, a number of Brierty’s other civil construction projects also generated losses or smaller than expected margins, which further raised the liquidity pressure on the business.

Due to the cash flow issues, outstanding creditors rose due to cash not being available to make the payments.

Payment arrangements were made with a number of trade creditors. In many cases those arrangements were then renegotiated after payments were missed.

During this period Brierty arranged temporary excess funding of $5 million above its approved overdraft limit of $20 million.

The company’s mining division was bringing in positive earnings but this was not enough to improve the working capital issues the company was facing.

Brierty tried to get a capital injection from investors and also refinance its hire purchase facilities to boost working capital.

It could not raise the funds needed but did manage to get some temporary payment moratoriums from its hire purchase financiers.

Then the BankWest discussions began with Brierty seeking $10 million in funding to “normalise” its working capital position.

It ultimately ended up with a $6 million facility being secured that required repayment by December 31 using the proceeds from an asset sales program.

As part of that agreement, BankWest agreed to the release of the first $2 million of plant and equipment sales proceeds to the company for working capital, giving Brierty, in effect, an additional $8 million in liquidity.

Since it has been in administration, both of Brierty’s mining jobs – Western Turner Syncline and earthworks and site preparation at Newmont’s Boddington project – have gone, as have its three remaining civil jobs.

Rio Tinto terminated the Western Turner Syncline contract on September 11 “due to its concern that the administrators could not provide certainty as to meeting the onsite safety requirements as well as the ongoing trading of the business to project completion,” the creditors report says.

The administrators put in a claim for about $4.2 million to Rio Tinto for works carried out between August 26 and September 13 and received that money on October 9.

On the Newmont job, the administrators ran the numbers and decided the remaining two stages of the 12-stage job Brierty was doing was not cash flow positive.

They agreed, with Newmont, to terminate the job as a new contractor was available to continue on site.

The administrators concluded that Brierty may have become insolvent on May 16 but more likely by July 1. They say further work needs to be done to confirm this.

The directors dispute the suggestion the company was insolvent from May 16.

“As you have noted in the extract of the draft report to creditors the company obtained insolvency advice from an international law firm on May 11, which provided comfort that the company was not then insolvent,” the directors said.

They also pointed to the five engagements KPMG undertook at the behest of BankWest to stress-test Brierty’s cash flow forecasts.

Going forward, creditors will meet at 10.30am on February 7 at the Parmelia Hilton hotel in Perth.

One of the things for them to discuss is whether to approve the more than $2.1 million the administrators are seeking for their work so far. 

They can also consider deeds of company arrangement, although, according to the report it does not appear the administrators will be recommending any.

The administrators report that eight parties expressed an interest in a transaction involving some or all of Brierty’s assets and its Australian Securities Exchange listing via a deed of company arrangement.

However, due to the nature of the expressions of interest received and the expected return from any company asset sales via a DOCA, the administrators determined the return to creditors would be less than if the company was liquidated.

The second meeting of Brierty creditors is to be held at 10.30am.