After conducting exhaustive due diligence on the Fairview Architectural business, Grant Thornton has recommended to creditors that the Company accept a comprehensive and binding Deed of Company Arrangement (DOCA) submitted by FVA Group. It's a DOCA with a difference - all debts will be paid. Commentary by Andy McCourt
|Perth's Optus Stadium uses Fairview's interlocking aluminium panel Stryüm on the exterior.
- by Andy McCourt, Publisher:
It's rare indeed to be able to report good news on company administrations and over the years, I have seen everything from outright phoenixing to tragic mis-management. But, as the administration under Grant Thornton has progressed and due dilligence conducted by prospective buyers, it is clear that Fairview Architectural is no ordinary administration. FVA Group, presenting the DOCA, is essentially the same management and under the terms of the DOCA, proposes a full 100 cents in the dollar settlement to creditors and staff, who will keep their jobs.
Yes, that is not a typo - 100 cents in the dollar. The headwinds that made the VA necessary included the threat of a massive class action linked to combustible cladding applied to tall buildings, and its removal. Fairview actually outlayed well over a million dollars in defending this and settling some claims, without admitting any liability. The products they sold were entirely legal at the time they were sold, have not been sold for many years and none are known to have 'caught fire.' The class action is funded by a US law firm, Omni Bridgeway, specialising in opportunistic class actions where it stands to make millions of dollars if successful. It was last reported in June to be a $5.8 million claim, with Omni Bridgeway asking the Court to ask Fairview to produce its insurance policies in case the insurers are pursued for the claim. However, Fairview states that any class action claims will be 'vigorously defended.'
Whichever way the class action goes, one thing is clear and that is that Fairview Architectural is a viable business and its directors and management have dealt with the administration with utmost integrity and openess, formulating the FVA Group's DOCA as the only way to preserve jobs and pay creditors in the face of a potentially ruinous class action that, they say, is not justified.
Apartment owners who have combustible cladding on their buildings do, of course, need to be considered but perhaps a sledge-hammer class action where the funding lawyers' fees can swallow the majority of any settlement, is not the way to go in this case. A recent class action against the Bank of Queensland and its agent DDH Graham, where investors were dudded, delivered them $12 million (of $60 million owed), a payout that was almost matched by the $11.75 million bill from their lawyers, funders and administrators. There is no suggestion that this scenario would apply to the class action against Fairview, if successful, but 'free' class actions have to be paid for, ultimately.
Perhaps there are other ways, such as funding from the state governments who wrote the building codes and authorised inspection of the constructions, for the affected appartment-owners to gain relief - but that's another story. Meanwhile, it looks like Fairview Architectural, under FVA Group, will carry and grow its business if creditors vote for the DOCA on 20th October.
The company statement follows:
ADMINISTRATORS ENDORSE DOCA FOR FVA GROUP TO ACQUIRE FAIRVIEW ARCHITECTURAL
October 14, 2020
Acceptance of the DOCA/Creditors Trust would effectively ensure that trade continues on a business-as-usual basis.
While several entities expressed an interest in acquiring the Fairview business and its broad product portfolio, the fully funded FVA Group rescue package (DOCA), includes undertakings to:
- Pay every trade creditor of the company certainly and in full (100 cents in the dollar)
- Save all of the company’s regional jobs
- Fund contingencies for a pending legal action against the former Fairview company, and
- Allow the business to focus on growth.
The Grant Thornton report confirmed that – as Fairview directors had always maintained – the Company was solvent up to the commencement of the administration and the basis for the appointment was that the Company had potential threats to become insolvent.
Insolvency threats presenting included widespread industry contractions (due to COVID and other headwinds) plus expected legal costs brought by an unproven class action claim.
Fairview office holders have always acted responsibly and any suggestion to the contrary is refuted. Were any claim against them to be pursued it would be vigorously defended.
Those at the heart of this essentially strong business are confident that the report findings confirm the FVA Group’s DOCA to be in the very best interests of its creditors, employees, clients and associates.
A meeting of creditors – in response to publication of the Administrators report – is to be held via an online webinar at 11:00 AM (AEST) on Tuesday, 20 October 2020.