According to the first liquidators’ report for Diamond Homes, the company employed more than 100 staff at its peak and was heavily reliant on work from its principal contractor.
However, from 2024 there was a sudden and significant reduction in work available from that contractor, resulting in the company carrying a workforce no longer supported by its reduced revenue.
Wang advised liquidators the company took steps to reduce staff numbers and restructure its operations but because of continuing financial pressure, the choice was made to call in the liquidators.
McDonald Vague has prepared an initial statement of affairs for each of the three companies. However, Zhang, speaking to the Herald, emphasised that many of the figures listed were preliminary estimates that would require further investigation.
Diamond Homes
Diamond Homes, which was first incorporated in December 2017, has combined assets with a book value of $7.37m, including $1.22m relating to motor vehicles.
However, the liquidators understand the receivables book value of $4.41m includes a substantial portion of historical debtor balances that are subject to prolonged disputes.
In addition, they understand that certain debtor payments received before liquidation remain unreconciled in the company’s accounting records.
The receivables balance also includes a loan of $1.43m advanced to a related entity (Diamond Construction).
Each debtor balance will be reviewed on its own merits, and reasonable steps will be taken to pursue recovery where appropriate.
The figure listed for its inventory, $1.4m, is also based on records of journal entries recorded more than 12 months ago, and according to Zhang is not an accurate reflection of the inventory on hand at the commencement of the liquidation.
As for amounts owing, Diamond Homes had 168 listed creditors at the date of liquidation, including the Inland Revenue Department (IRD), Ministry of Justice and Accident Compensation Corporation (ACC).
The company had 22 registered security interests against it at the date of liquidation, including general, specific and money security interests.
The liquidators said they have written to these parties and some have responded to confirm there is no debt owed and that they had discharged their security interest.
Those listed with a security interest include Carters Building Supplies, Bunnings and United Steel, among others.
At this stage, United Timber Merchants was listed as owing $28,285, Mico New Zealand was owed $4760 and Fletcher Distribution (Placemakers) was owed $329,529.
Employees are owed an estimated $596,720 in outstanding wages and holiday pay as a preferential creditor, although any final amounts will depend on the claims received and the liquidators’ review of said claims.
The IRD is owed $4.25m in GST and PAYE. This debt is based on the company’s MyIR records and is likely overstated, according to Zhang.
Zhang confirmed to the Herald that he is still waiting for the IRD to submit a creditor claim form and that the estimated amount might include interest and penalty amounts, which will rank as unsecured.
As for unsecured creditors, trade creditors are owed an estimated $3.05m, based on unaudited company records supplied to the liquidators by the company.
A further $151,522 is owed to the IRD, with funds potentially owed to the landlord of premises leased by the company.
The company owes a preliminary sum of $8.42m to creditors.
Diamond Construction
Diamond Construction was incorporated at a later date, in September 2023, and has combined assets with a book value of $5m.
Zhang and Pronk understand that similarly to Diamond Homes, the company’s receivables book value of $4.37m includes a substantial portion of historical debtor balances that are subject to prolonged disputes.
This figure also includes $3.98m owed by related entities that are also in liquidation.
As for amounts owing, Diamond Construction had 59 listed creditors at the date of liquidation, including the IRD, ACC, Auckland Council and Auckland Transport.
The company had eight registered security interests against it at the date of liquidation, including general security interests, specific security interests and purchase money security interests.
Some of those parties have confirmed to the liquidators that there is no debt owed and have discharged their security interest.
Those listed with a security interest include Carters Building Supplies, Bunnings, which is owed $900,568, and Placemakers, owed $100,270.
Employees are owed an estimated $199,347 for outstanding wages and holiday pay as a preferential creditor, although any final amounts will depend on the claims received and the liquidators’ review of said claims.
The IRD is owed $381,706 in GST and PAYE, and this is based on records from myIR, meaning the figure is likely overstated and the liquidators await a more accurate claim form from the IRD.
As for unsecured creditors, trade creditors are owed an estimated $1.91m, based on unaudited company records supplied to the liquidators by the company.
A further $7899 is owed to the IRD, with funds potentially owed to the landlord of premises leased by the company.
Another $1.73m is owed in loans, although this is referred to under related parties.
The company owes a preliminary sum of $5.23m to creditors.
D&L Development
D&L Development was incorporated in December 2021 and has combined assets with a book value of $617,391, which at this stage refers solely to prepayments based on unaudited company records supplied to the liquidators.
Zhang and Pronk said in their report that the prepayments relate to deposits paid by D&L Development on bare sections of land under extended settlement arrangements with developers.
Certain deposits have been forfeited as the company was unable to complete settlement and pay the outstanding balances under the sale and purchase agreements by the contractual settlement dates.
The director has advised that as at the date of liquidation, two contracts remain unsettled; however, there is little to no resale value in the contracts in a declining property market.
The liquidators said they will conduct an independent review of the contracts and assess whether it is commercially viable to resell the contracts to third parties.
The company has no known employee debt but does owe the IRD $927,824 in GST and PAYE; again this is provisional in that a formal claim form is yet to be delivered to the liquidators.
As for unsecured creditors, D&L Development owes $3.7m to trade creditors; however, $3.69m of this is owed to the associate entity Diamond Construction.
The company owes creditors $4.62m, including the related-party debt.
Together, all three companies, including any related-party debts, owe a combined $18.27m, with IRD alone owed $5.72m.
These figures are subject to change as Zhang and Pronk continue their investigations, but Zhang confirmed the figure with related-party debts removed is likely above $10m.
Zhang and Pronk could not estimate a date of completion for the liquidation nor whether distribution to any class of creditor was likely.
Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.
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