7 Feb 2013

Leaky homes may have been factor in Mainzeal downfall

1:56 pm on 7 February 2013

A construction industry player says Mainzeal's strategy to go ahead and repair leaky buildings rather than waiting for costly court cases to be resolved, may have led to its downfall.

BNZ bank put Mainzeal Construction and Property into receivership on Wednesday after the company's owner, Richard Yan, could no longer support the construction firm financially.

Mainzeal is New Zealand's third largest construction firm, behind Fletcher Construction and Hawking, and has been involved in projects worth $7.5 billion throughout New Zealand since being founded in the late 1960s.

The company, which employs more than 400 staff, was placed in receivership at the request of Mr Yan. Mainzeal is owned by his company, Richina Pacific, which has interests in China.

Pieter Burghout, a spokesperson for the New Zealand Construction Industry Council and BRANZ chief executive, told Radio New Zealand's Nine to Noon programme on Thursday it appears that Mainzeal ended up bearing the brunt of expensive leaky building repairs.

"My understanding with Mainzeal is they had taken a pro-active approach to fixing their leaky building portfolio, rather than going to court and arguing who was owed what and what have you. I know that (chief executive) Peter Gomm's strategy was to just jump in and fix the building.

"I know they were doing some of that work at the top of Hobson Street in Auckland - and that was just a pure case of jumping in, rather than going to court and leaving the lawyers to win out of exercise they were wanting to go in and fix the work. Now that strategy may have come back and bitten them."

Mr Burghout said it is unusual for a company the size of Mainzeal to have a single owner.

Meanwhile, at least one listed company says it is likely to be significantly affected by the receivership.

Eastern Bay of Plenty lines company Horizons Energy Distribution says its subsidiary, Aquaheat, is owed money on a number of contracts with Mainzeal.

The amount is not yet known, and Horizons said the actual financial position is being worked out by Aquaheat's management. However, Horizons Energy's chairman Rob Tait, said it is clear there will be an impact on this year's profits.

Mr Tait said Mainzeal's receivership came as a surprise, and there was no hint of trouble when it held meetings with the company last week and the loss of a key long-term customer is a serious setback.

Mainzeal 'strong'

A business commentator sees no reason why Mainzeal Construction should stop operating.

Milford Asset Management executive director Brian Gaynor said parent company Richina Pacific has a chequered history in New Zealand and would probably lose some money.

However, he told Radio New Zealand's Morning Report programme on Thursday that Mainzeal is in a strong position.

"It's got major work in Auckland and in Christchurch, and I would imagine under new ownership with some of its debt problems being restructured, that this company could prosper in the future.

"I see no reason why it shouldn't continue as an operation, albeit under new owners and under a new restructured debt security."