Sydney housing developer Bathla stands down 213 staff after raising two weeks of cash
Administrators running the Sydney home builder have secured only enough cash to keep the business going two weeks.
One of Sydney’s bigger home builders, Bathla Group, stood down 213 of its 350 employees on Monday after only raising enough money to continue paying the remaining employees for two weeks.
Bathla’s administrators issued a statement Monday morning disclosing that work would continue on houses and apartments backed by five commercial lenders. Construction on the remainder of its 3000 homes not covered by the financing will be suspended today. Another 14,000 planned homes, representing almost 20 per cent of those planned for New South Wales, are in limbo too.
Administrator Stephen Longley said he and the other administrators would try to secure longer-term funding over the next two weeks. The amount of money raised and the identity of the lenders was not disclosed.
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By continuing you agree to our Terms and Privacy Policy.“Our immediate priority has been to secure sufficient short-term funding to maintain a minimum viable operating structure,” he said.
“Significant work remains to secure the funding required to progress and ultimately complete all projects currently under construction. We will continue to work closely with lenders and other key stakeholders to pursue those arrangements.”
The administrators have been trying to raise some $20 million from Bathla’s existing lenders to continue operating in the short term and complete some of the newly finished homes.
Private credit
Founded by brothers Bhart Bhushan and Rajinder Mohan in 1997, Bathla targeted immigrant families mostly settling in Western Sydney, racking up at least $3.1 billion in debt and attracting complaints over many years about the quality of its work.
A large part of the company’s loans came from private credit funds, which collect money from wealthy individual investors and lend it to businesses that big banks won’t. Regulators changed the rules after the 2008 global financial crisis to make it harder for banks to lend to property developers, which were particularly hard hit by the crisis.
Some of Bathla’s credit funds are likely to have provided the company’s administrators with short-term financial support to reduce the chances of the company collapsing. They will hope that specific housing projects they have financed can be completed and sold, allowing them to get their money back.
Among the funds involved is RW Capital, which was founded in 2001 by Dan White, a descendent of Raymond White, the Australian real estate pioneer whose eponymous company has approximately 1000 outlets across Australia and New Zealand. Mr White did not immediately respond to a request for comment.
When the administrators were appointed, Bathla blamed changes to property tax rules in this year’s federal Budget, which hit prices. But a new insurance system introduced in NSW five days before the administrators were appointed on August 25 is attracting attention too.
On August 20 NSW introduced “decennial liability insurance”, which offers 10 years cover to rectify problems in apartment buildings over three storeys high. The insurance is an alternative to lodging a bond worth 2 per cent of the project with the NSW government, an amount that will increase to 3 per cent in 2028 to encourage builders to switch to insurance.
Experts say Bathla would struggle to obtain insurance because of doubts about the quality of its homes. A NSW government spokesman referred questions to the administrators.
Mr Bhushan and Mr Mohan have not been seen since they called in administrators from Teneo Australia. The Australian reported today that security guards had been hired to prevent tradesmen owed money taking away building materials they had supplied to Bathla worksites.
