- Listed engineering firm RCR Tomlinson has gone into administrations after failing to get additional bank funding.
- It follows cost blowouts and write-downs on two Queensland solar projects, for which the company is now facing a class-action lawsuit.
- Today’s announcement comes just three months after the company raised $100 million from investors to pay for the write-downs.
Engineering group RCR Tomlinson has gone into administration after being unable to secure additional funds from its banks following cost blow-outs on solar projects.
The collapse of the company comes just three months after it raised $100 million in equity from shareholders to pay for writedowns on two Queensland solar farms, which were part of the same contract for Edify Energy, and strengthen its balance sheet.
Allan Gray managing director Simon Mawhinney said RCR’s collapse was “staggering”.
“It is impossible to envisage a situation where this outcome is not the result of gross negligence, incompetence or fraud on the part of the Board, management and/or its bankers,” Mr Mawhinney told The Australian Financial Review.
“This after having raised $100 million from shareholders only three months ago and representations that the business was in good shape but for one solar contract.”
Allan Gray owns 5.3% of RCR.
RCR said on Thursday that restructuring advisors McGrathNicol were appointed as administrators at 5pm on Wednesday.
“Further to the company’s trading halt and announcement on 12 November 2018, the company has not been able to secure additional funding,” RCR said.
“As a result, the boards of the group companies met and resolved to appoint administrators.”
RCR went into a trading halt on July 30 that lasted a month. On August 28 it reported a $57 million writedown on Edify’s Daydream and Hayman solar farm projects in Queensland and launched a $100 million capital raising at $1 a share.
The equity raising, which was supported by most institutional investors, received a take-up rate of 88%.
When its shares re-opened for trading on August 30, RCR’s stock price fell by more than 60%, dropping to $1.05 from $2.80. The stock continued to weaken, falling below the new issue price to close at 87¢ on November 9.
RCR told investors at its annual general meeting on October 30 that it had net cash of $54.8 million and a total syndicated facility of $431.3 million expiring in December 2019.
Chairman Roderick Brown reassured investors about RCR’s outlook, saying the company had a $1.1 billion order book and was the preferred contractor for more than $2.7 billion in new projects.
But RCR unexpectedly fired workers from its Wemen solar farm project in Victoria in October and went into a second trading halt on November 12, warning it planned to make an announcement on its 2019 earnings outlook that would have consequences for its funding.
On November 14 the company voluntarily suspended its shares from the Australian Securities Exchange, and on Tuesday it said the suspension was expected to last until November 27.
The second trading halt came after RCR’s chief financial officer, Andrew Phipps, resigned suddenly on November 7 citing “personal circumstances”.
Former chief executive Paul Dalgleish previously stepped down without explanation on August 7, receiving a $1 million termination payout.
RCR did not explain why the executives left. Unions have been concerned for some time about how the company was managing its solar projects, alleging it won projects by bidding cheap prices.
Litigation firm Quinn Emanuel Urquhart & Sullivan said on Tuesday it had filed class action proceedings against RCR in the NSW Supreme Court.
Quinn Emanuel partner Damian Scattini said it was “unlikely” the first writedown announced by RCR in late August was a surprise to its management team.
“Either they knew and hid it, or they didn’t know [about the solar farm problems] which is probably worse.”
Quinn Emanuel said that RCR breached continuous disclosure laws because its senior management team either was aware or should have been aware of the solar farm problems before announcing them to the market on August 28.
The lawsuit, which is understood to be asking for tens of millions of dollars, will be financed by Burford Capital. The lead plaintiff is the trustee of a superannuation fund.
This post first appeared at the Australian Financial Review. Copyright 2018. Read the original article here.