Bathla Group's administrators scramble for cash as break-up begins

More than two weeks after entering voluntary administration, Western Sydney developer Bathla Group is still operational, but only just.

Since administrators took control, the company has been scrambling for cash, with shutdowns looming on several occasions. Each time, Bathla has managed to find enough money to survive a little longer.

A temporary reprieve

The latest reprieve came on Monday, when five lenders agreed to provide between $3 and $5 million to keep a much smaller Bathla running for another two weeks. Construction on projects not backed by the five participating lenders has been suspended, although individual lenders may take control of projects and continue construction separately under a different building licence.

More than 60 per cent of Bathla's roughly 350 staff have been stood down. The reprieve is a long way from the roughly $20 million the administrators initially said was needed to keep construction operating for five weeks.

The break-up begins

With only five of around 40 lenders funding Bathla's continued operation, others are increasingly taking control of projects securing their loans. This week, 360 Capital Mortgage REIT escalated efforts to recover $31.7 million across four Bathla-linked loans, with receivers appointed over three and being pursued over the fourth.

For most of the properties, the strategy is to sell them down. But one loan is secured against 72 near-complete apartments, where lenders are working to get the project to occupancy so existing pre-sales can settle before the remaining apartments are sold.

Ray White Capital, billionaire property investor Bob Ell’s Leda, Balmain and Woodbridge Capital are some of the lenders that have appointed receivers or otherwise taken control of individual projects.

A complex situation

Property development is often financed project by project, with lenders holding security over particular land or developments. What sets Bathla apart is the sheer scale on which that process is now playing out; dozens of lenders, hundreds of companies and more than 200 sites.

So while Bathla remains in voluntary administration as a group, what happens from here is increasingly being decided project by project. That means there may be no single outcome for subcontractors and buyers caught up in the collapse.

A subcontractor owed money for work already completed may still have to pursue that debt through the administration, even if a receiver takes control of the project and hires someone else to finish it.

For buyers, the outcome will depend heavily on their individual development, including whether it continues, is sold or refinanced, and the terms of their contract.

A possible way out?

Under voluntary administration, administrators must investigate the options for Bathla's future and ultimately recommend the course they believe would produce the best outcome for creditors compared with liquidation.

That has included considering proposals to refinance or restructure parts of the group. One such proposal emerged this week, involving around 25 land-only Bathla sites worth about $1 billion and funding from an unidentified Japanese investor-backed syndicate.

However, on Friday afternoon, the private credit investment manager said the offer had been withdrawn. Renown said the parties had been unable to agree on key conditions, including the corporate structure of the proposed deal and obtaining fresh valuations of the sites.

Government response

The NSW government has made clear it sees Bathla's future as a matter for its lenders. Treasurer Daniel Mookhey said,