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Insolvent contractor’s staff recover just 10%

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government and former workers are set to receive just over 10 percent of what they are owed by a Cavalier Construction affiliate, its liquidators have revealed.

Andrew Davies and Kendrick Christie, the Crowe Bahamas accountants and partners, affirmed in a recently placed advertisement that Bobcat (Bahamas) preferred creditors are due to be paid a solitary dividend equivalent to 10.28 cents of every dollar they are owed.

So-called preferred creditors are typically the Government, with outstanding tax liabilities due to it, plus former staff who are owed severance payments plus other sums and benefits unpaid when the construction machinery and equipment supplier was placed into Supreme Court-supervised liquidation in early 2020 just as the COVID pandemic struck.

“The joint official liquidators have declared a first and final dividend to the preferential creditors of 10.28 cents on the dollar,” the notice read. This means, out of a collective $203,002 in total preferential creditor claims, the Government and former Bobcat staff will receive a total $20,859 that will be shared, and split, proportionally according to the size of each creditor’s claim. The latter figure is less than one-seventh of the more than $148,000 claimed by former staff.

CIBC FirstCaribbean International Bank (Bahamas), as Bobcat’s secured creditor, fully recovered the $147,421 owed to it on an overdraft facility which was secured via a debenture that imposed fixed and floating charges over the equipment supplier’s assets. This was confirmed by the two liquidators, who also disclosed that all unsecured creditors - who they did not name - will recover nothing of the collective $133,736 they are owed despite these claims being approved.

Of the total $380,631 in assets realised from Bobcat’s winding-up, some $137,717 - 36.2 percent or more than one-third - were required to cover the liquidation’s costs, including those of the Crowe Bahamas accountants and their attorneys. Some $74,633 was also set aside to complete outstanding expenses likely to be incurred in completing Bobcat’s wind-up.

Messrs Davies and Christie could not be reached for comment before press time yesterday, but it is thought that they are relatively satisfied with the outcome given that they had to seek purchasers for Bobcat’s remaining machinery and equipment at the height of the COVID pandemic when sales prices were less than they otherwise might have been.

The Crowe (Bahamas) duo, in their last report to the Supreme Court in July 2022, admitted that recoveries from the sell-off of Bobcat Bahamas’ equipment, inventory and vehicles was far lower than anticipated, coming in at a total $380,630 - a sum almost 37 percent or more than one-third below their initial estimates of $602,750.

“The actual realisations of the assets, particularly plant and machinery, are materially lower than expected. While the joint official liquidators note certain sectors of the construction industry have remained relatively buoyant through the pandemic, this outcome is not unreasonable given the overall severe economic challenges the jurisdiction has faced,” they argued.

“The joint official liquidators are comfortable that the format and timing of the sales process they ran maximised returns for the liquidation estate. The joint official liquidators note that if realisations of plant and machinery were in line with pre-pandemic estimates, the financial position of preferred and unsecured creditor classes would have been significantly improved.”

Breaking down the recoveries, Messrs Davies and Christie that when it came to plant and machinery assets “total realisations net of VAT amounted to $324,253 against a pre-pandemic estimated value of $466,050.

“This represents a recovery of 70 percent on expected sales value which the joint official liquidators consider a satisfactory outcome given the significant negative impact of the pandemic on the domestic economy, and the challenges of running a sales process during this same period.”

The Crowe Bahamas duo’s notice, meanwhile, also confirms they had to admit a disputed $54,161 VAT bill issued by the Government as part of the $203,002 preferential creditor claims. The Department of Inland Revenue/Ministry of Finance submitted the VAT claim in the Bobcat Bahamas liquidation - even though the sum was owed by Cavalier - on the basis of joint liability.

The Government’s argument was that, since Cavalier and Bobcat were part of the same tax-paying group under the VAT Act, all become liable to pay outstanding taxes if one entity fails to make the necessary payments that are owing. The liquidators previously wrote that, should the unpaid VAT claim be accepted, the total sum due to the preferred creditors would be $203,002 - the same figure as printed in the notice.

Having to admit the VAT claim reduced the payout, and recovery, for Bobcat Bahamas staff. At the time of the liquidators’ July 2022 report, they were owed a collective $148,842 in unpaid severance and other benefits that came due when the company closed its doors in January 2020.

Of the net $180,489 cash that was forecast to be left when all liquidation expenses were paid, some 61.8 percent or $111,590 was due to go to CIBC FirstCaribbean International Bank (Bahamas) leaving the former Bobcat employees and the Government to fight over the then-remaining $68,899.

“The liquidation has experienced significant delays and unexpected complexities as a result of the worldwide pandemic. The joint official liquidators have within these restrictive and challenging conditions sought to maximise returns for the creditors of Bobcat Bahamas,” Messrs Davies and Christie concluded in their July 2022 report.

“These delays resulted in increased holding costs to maintain adequate insurance and security of the assets the joint official liquidators took charge of. These costs in turn impacted overall returns for creditors as they were paid for out of the liquidation estate.

“The joint official liquidators were not in a position to wait for the pandemic to dissipate and the economy to stabilise given the significant amount of uncertainty involved, and so ran the sales process for the main assets of the company in April 2021.”

The Crowe Bahamas duo are also responsible for Cavalier Construction’s liquidation, which is understood to presently be at a standstill. That winding-up largely hinged on the sale of Cavalier’s former head office on Crawford Street in Oakes Field and the sales price realised.

However, again as secured creditor, CIBC FirstCaribbean is thought to have intervened and sold the property itself using its power-of-sale under the collateral. All proceeds from the sale of a property once valued at $2m have gone to pay off the bank’s loan. It is understood, though, that the liquidators are awaiting a possible recovery from the sale of an asset held by Cavalier’s former parent, Galaxy Group, which owes the insolvent contractor money.

Comments

moncurcool 10 months, 1 week ago

Of the total $380,631 in assets realised from Bobcat’s winding-up, some $137,717 - 36.2 percent or more than one-third - were required to cover the liquidation’s costs, including those of the Crowe Bahamas accountants and their attorneys. Some $74,633 was also set aside to complete outstanding expenses likely to be incurred in completing Bobcat’s wind-up.

Is this for real? The liquidators get 1/3 and the staff not even 10%?

Dawes 10 months, 1 week ago

Liquidations are only beneficial to the accountants and lawyers. They always make money

K4C 10 months, 1 week ago

Cavalier Construction was one of the TOP of it's time,

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