By Shane McGinley
Australian firm went bust in May following exodus of senior execs, cash from Dubai office
Nearly a third of Middle East contractors that worked on projects for Hastie Group, an Australian engineering firm that went bust in May, have cashed in nearly US$100m worth of performance bonds in a bid to recoup losses on work already undertaken.
Lenders have issued around US$225m in contract performance guarantees, including US$125m in Australia and a further US$99m in the Middle East, administrators told The Australian newspaper.
Around 30 percent of Middle East contractors have cashed in performance bonds - insurance securities commonly used in the real estate and construction sector to safe guard from losses - in a bid to retrieve expenses already occurred on projects they were working on for Hastie, the report said.
Hastie, which has 7,000 employees worldwide, provides refrigeration and air conditioning services for the building industry and worked on UAE projects including Abu Dhabi's Dalma Mall and Dubai's JAL Towers.
The Sydney-based firm posted a loss of US$145m in the six months to December 2011 and earlier this year it reported a US$19.5m "accounting irregularity", saying that an initial investigation showed an employee had falsified accounts to meet profit forecasts.
According to documents published in May by Australia’s ABC news network, senior executives wired AED11m (US$3m) funds back to Sydney days before the company formally went into administration, leaving up to 1,500 workers in the UAE out of pocket.
Three executives then left the country and returned to Australia, the report added.
ABC claimed the transfer was ordered by Hastie’s head office in Sydney and came after executives had failed to negotiate a restructuring deal with banks.
While no unlawful activity has been suggested, ABC said the transfer of funds and the exodus of management had “left Hastie's head office in Dubai with little or no money to cover the entitlements of around 1,500 workers, some of whom are expatriate Australians”.
Former Hastie Group CEO Bill Wild said a lot of the blame for the company going bust can be attributed to a series of bad acquisitions in the Middle East. Wild highlighted the purchase mechanical and electrical contractor Rotary Humm, whose losses resulted in a massive writedown for Hastie.
''They bought companies that were worth nothing, it was a disaster,'' he told ABC News. ''But the companies weren't worth two bob. They started hiding losses and burying stuff in the balance sheet,'' he added.
Wild reported that issues with Rotary Humm’s projects in Dubai and Abu Dhabi also led problems and resulted in a writedown of US$50m November.
The UK and Ireland subsidiaries of Hastie Group are separate corporate entities, and have not gone into administration.