26 Nov 2018

City Rail Link to meet with Aus administrators of RCR Tomlinson

9:03 am on 26 November 2018

The head of City Rail Link expects financial support for one of its key partners to continue, despite the company's owner going into administration.

A welder works on the City Rail Link project

Photo: RNZ / Claire Eastham-Farrelly

RCR Tomlinson went into administration last week, just six weeks after its New Zealand subsidiary RCR Infrastructure was jointly awarded one of seven contracts for the $3.4 billion City Rail Link.

City Rail Link chief executive Sean Sweeney last Friday met with the New Zealand arm of McGrathNichol Services, the administrator appointed to run the company, and said it was positive.

He was told the Australian administrators would be going through the business and identifying the profitable parts of the business to be sold in some form of trade sale.

Mr Sweeney said it was indicated that the rail business had been identified as one of the profitable parts of the business and there were people looking at a possible purchase.

"So they were very keen to take that forward, and to that end they were looking at getting further support from the banks so that the businesses would continue trading comfortably whilst all this was going on."

At the moment there was no impact on the New Zealand business, he said.

"The current contract is for about $7.5 million to conclude a design and it would be our preference that RCR continue with that contract and complete the work that they were engaged to do."

Based on the discussion with the administrator, he said there was every likelihood that the contract would be concluded by the date it was supposed to be completed - April next year.

It was unknown if the construction work would be re-tendered after the design work was complete, Mr Sweeney said.

"We're still working on the implications of what's happened last week but at the moment we're focused very much on keeping the design contract continuing.

"We are looking at the options for the construction part of that work. We are looking at a wider range of options rather than just RCR carrying on and doing that," he said.

He said he didn't know the firm was in financial difficulty when it was selected as a contractor a little before August this year.

"There was no indication that were under any sort of financial problems. They then went into a trading halt in August and we did a fair amount of due diligence on why they were in that trading halt."

After meeting the top bosses at the firm, it was understood that the reason they were in a trading halt was due to one project - a solar project - that had gone "very bad" with about a $50m loss.

"We held finally signing off after we'd gotten to the bottom of that."

The banks did their due diligence and increased their overdraft to them, they then went to a market capital raising," Mr Sweeney said.

"I'm quite confident that they'll complete the design."

Mr Sweeney said he has not had discussions with Transport Minister Phil Twyford nor Auckland Mayor Phil Goff about it.

He said the administrators seemed confident they would get the support from the banks, but he would be checking this when he flew to Sydney next Friday to meet with the Australian administrators.

"I would just like to now go and meet the actual people who are doing the work and basically get the same message from them as we got on very positive terms from the Auckland-based administrator."

He expected to get an update and more detail on the process, as well as a timeline from the Australian administrators.

Mr Sweeney said all indications from the administrator were that disruption to the New Zealand business would be minimal because the administrator wanted to get financial support to allow the profitable arms of the business to keep trading.

"It would be in their interest to minimise that disruption because if they're going to put them up for sale they obviously want them performing in the best light possible, so that's one of the things we just want to find out a bit more detail."

Get the RNZ app

for ad-free news and current affairs