Business Turnaround


A business case of how the dVT Group took a substantial property developer facing hardship and substantial losses, through a formal administration process to achieve an excellent result not only for the directors, but for the creditors and banks involved.


Situation:

The company was one of NSW’s largest privately owned property developers. Declining
property valuations had impacted their stock, leading to hardship and stress. With large debt levels, the
bank involved was looking to appoint a receiver, who would then sell the incomplete properties in a fire
sale. This would mean that existing losses would become further exaggerated by both costs of the
receivership plus reduced prices generated from the rushed sale of incomplete sites to a far smaller pool
of potential buyers. The dVT Group were appointed as voluntary administrators to attempt a workout.

Actions:

The formal administration allowed dVT to crystallise the debts, freeing up some working capital and stopping
action from other creditors. The use of a VA and DOCA process also allowed the company to
keep trading as long as it had the support of banks and other stakeholders.
Under the administration and directorship of dVT, the real position of all major secured creditors was
determined as was the extent of potential losses on a forced sale basis and on a refinanced or delayed
finance sale basis. It became clear that most creditors were going to lose $ in some way, so dVT worked
with them to determine how much they were prepared to lose now as opposed to their willingness to
work with the director to try and salvage their position in the future.
Properties involved required substantial work to enable completion so they could go to market. Banks
therefore had the option of realising the low existing value of these uncompleted sites or supporting the
completion of the development where a larger pool of potential buyers would likely generate a higher
return and cover the costs.

Outcomes:

Many creditors provided additional credit to cover the development costs even though many had
already incurred a loss. Suppliers and contractors were on the whole very pragmatic about the events
that unfolded, and showed their support of the dVT appointed director by continuing to provide services
and goods, on the grounds that they would continue to make profits while the development was being
completed, even if some of their debts were written off.
The development was completed and sold at the expected market prices so that the majority of
creditors were repaid and creditors were substantially better off than if a receivership had occurred.
The developer continues to trade successfully today providing a valuable contribution to the NSW
economy.