Highmark Homes goes down owing $700,000

A sixth national building franchise holder - operating an Otago outlet - has been placed in liquidation with debts of more than $700,000.

P&A Design Ltd, which traded as Highmark Homes, was placed in liquidation by sole director Paul Garbutt, of Dunedin, a fortnight ago. Liquidators Insolvency Management Ltd delivered its first report on Monday, outlining almost $713,600 of debts to secured, preferential and unsecured creditors.

The liquidators have said it is not yet possible to determine whether a dividend to creditors can be paid, and the value of assets, which could offset the $713,600 debt, is not yet confirmed.

It is understood three Highmark Homes houses are still under construction, with liquidators hoping for a "smooth transition to practical completion" for the clients.

Tauranga-based managing director of the privately owned parent of Highmark Homes franchises, Bob Hunt, was contacted for comment yesterday but did not return calls.

Since 2005, five Otago building franchise operations have been placed in liquidation, now including Highmark Homes (at liquidation owing $713,600), Smith and Sons in September last year ($348,000) and, earlier, the southern operators of Signature Homes (twice in five years, respectively $1 million and $1.3 million), Land-mark Homes ($836,000) and Jennian Homes ($581,000).

Jennian and Signature now have new southern franchisees operating successfully, the latter having completed and signed off by July last year 18 earlier contracts held with the previous builder. Initially, some of the franchises owed hundreds of thousands of dollars at liquidation and the respective parent companies had to take over and complete house contracts, but hundreds of unsecured southern business creditors collectively lost hundreds of thousands of dollars; nationwide, the total is millions.

Liquidator Iain Nellies, of Insolvency Management in Dunedin, said in his first report on Highmark Homes that Mr Garbutt had said increasing bad debt during the past 12 months had contributed to the insolvency, compounded by a tight market and small profit margin.

"This has resulted in a significant loss accumulating and led to a cash-flow shortage which has ultimately resulted in the inability [of P&A Design Ltd] to continue trading," Mr Nellies said.

Seven known secured creditors, including the ANZ National Bank and Placemakers, are owed $312,600, preferential creditor Inland Revenue is owed $34.200 and 54 unsecured creditors are owed $366,700.

The liquidation is expected to run longer than usual, as there are a "number" of retention payments owed to the company that are yet to be collected.

Mr Nellies said the ANZ National Bank held security outside the company, with personal guarantees and a mortgage over Mr Garbutt's property.

P&A Design Ltd was incorporated in May 2007, with Mr Garbutt sole director and a 50% shareholder.

• Highmark's website says the 13-year-old company supplies kitset homes around the country and for export, listing franchises in the Bay of Plenty, Central Otago-Lakes district, Kapiti, Northland, Southland, Waikato and Wairarapa.

- simon.hartley@odt.co.nz