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Gulf Conveyor Holdings' demise caught a number of sub-suppliers on a $17 million New South Wales coal-mine conveyor upgrade job, and the mine operator, on the hop. The suppliers stand to lose about $5 million as a result of the failure and several are concerned that key Gulf personnel will re-emerge at the head of new businesses before wreckage from the ruined company is sorted.

The Centennial Coal-run Angus Place mine engaged Gulf in June, 2003, as primary contractor on a $17 million conveyor uprade project. International Longwall News understands the $6 million-a-year supplier had booked consecutive annual losses before the Centennial project. Its losses were covered by funding from investor Nanyang Ventures, the group's chief secured creditor.

Established in 1985, Gulf became a leading player in the conveyor belt system design and maintenance market. After winning the Angus Place contract, Gulf let smaller contracts to companies such as General Underground Services, R&B Vogt, Apex Fenner, i.Power Solutions, and Wollongong Electrical Engineering which, along with scores of local businesses, have been hurt most by the collapse.

Another party with claims to whatever can be salvaged from the Gulf rubble is power generation group Alstom. Not acknowledged by Gulf as a creditor in its administration documents, Alstom nevertheless dropped a $3.5 million claim on Gulf for the latter's alleged failure last year to deliver a conveyor upgrade project at Playford power station in South Australia.

Angus Place subcontractors allege Gulf was not lodging progress claims with Centennial as early as February this year, which meant they were not being paid.

Sources told International Longwall News it appeared that one of the problems lay in how the contract was written. The contract was a cost plus contract, with Gulf also receiving performance bonuses. Another aspect of the contract was any variations were to be done at cost with Centennial entitled to a 10% retention.

In April the relationship between Gulf and Centennial soured when the coal company became aware of cost blowouts amounting to some millions of dollars.

Sydney-based liquidation specialist Green Krejci was appointed as administrator of the company in August, with Martin Green named joint liquidator. Gulf had unsecured creditor claims amounting to $6.5 million, with $5 million of that related to the Angus Place project.

By mid-September creditors had become increasingly disgruntled with various occurrences surrounding the administration process which had become drawn out.

For example, an attempt was made to solicit votes from Gulf employees who were sent completed proxy forms for signing. These were intended to be submitted at a creditors meeting. Also, in the leadup to the second creditors meeting some creditors only got notice of the meeting days before it was due to take place (some got no notice at all), making it impossible for some to attend.

Though the administrator disclosed that Martin Green had a prior relationship with Alan Campbell, a director of Gulf, this brought into question Green’s impartiality and independence.

Creditors put forward the motion to remove Green Krejci as administrators but Nanyang Ventures circumvented the process. According to September correspondence from one creditor to the administrator, Nanyang threatened to pull the plug on continuing to fund Gulf. This would have meant Gulf would have been unable to take court action to try and recoup funds.

Gulf meanwhile was continuing to conduct business in Western Australia for BHP Billiton and Rio Tinto through a company called Conveyor Systems Management (CSM). In an anonymous letter to one of the creditors an ex-Gulf employee described this as a “phoenix” operation to rebirth the company and funnel money while the company was in administration.

Under the Corporations Act, during the administration of a company, directors can only use the company property with the consent of the administrator. When questioned by creditors on the CSM business, Green Krejci wrote, “I was advised by the directors that this was done so as to secure and retain new business through BHP Billiton”

The anonymous employee outlined a scenario in which he believed directors were aiming to acquire Gulf cheaply in any liquidation process so they could “jettison the debt along with members of staff who were viewed as unfavourable, and begin trading anew”

Creditors favoured putting the business up for sale, a move which was resisted on the grounds it was a “people’s business.” Finally, under pressure from creditors, Gulf Conveyor Holdings was put onto the market for sale on October 18.

“The sale should provide a better return to unsecured creditors than if the business had been closed,” joint liquidator Martin Green wrote in a letter to creditors advising them of the business being put up for sale.

Companies that expressed interest in the sale included Canadian company Wilatt Conveyors, Continental Conveyors, i.Power Solutions, Nanyang Ventures and Gulf director Geoffrey Hammond. (An unnamed Gulf employee was outraged when the administrator stated at an October 19 meeting that all Gulf employees intended to leave the company if Willat’s bid was successful.)

Willat had in fact put in an expression of interest prior to Gulf being placed into liquidation which the administrator claimed not to have received.

By October 26 when a creditors meeting was to be held, some companies were feeling rather uncomfortable by several problems.

In correspondence from i.Power Solutions to the liquidators Green Krejci, finance manager Nick Burton called on Martin Green to “act in the best interests of creditors and not in the interests of the former directors of the company.”

He went on to outline three separate requests i.Power had made (as potential suitors for the business) for information regarding the Gulf business that had simply been ignored. Wilatt Conveyors’ requests for information similarly went unanswered.

Other than Gulf associated companies, the companies that had put in expressions of interest did not make offers for the business, largely because of the time constraints imposed by the administrators which made it impossible to conduct due diligence on Gulf.

The outcome to date is that three offers have been made on the company. One was from an individual, Peter Wheelhouse, for the Mudgee branch of the business. The second was for the Conveyor monitoring part of the business, from Gulf director Geoffrey Hammond. Nanyang Ventures made an offer on the remainder of the business. To date final contracts have not been signed.