Gold Coast-based property developer and finance company City Pacific has lost its long battle for survival, with Commonwealth Bank appointing receivers over a debt of more than $100 million.
Commonwealth Bank has appointed Ian Carson, Daniel Bryant and Grant Sparks of insolvency firm PBB as receivers and managers.
The trio will now be charged with the job of unravelling City Pacific’s messy corporate structure and trying to recover something from the company’s assets for creditors. According to City Pacific’s most recent financial report, the company has debts of over $500 million.
“We will work quickly to implement strategies for City Pacific’s assets, including but not limited to its role as developer of the proposed Townsville Ocean Terminal project and associated development,” receiver Ian Carson said in a statement.
Carson said City Pacific’s ability to service its debts and remain viable was badly dented when it lost control of the City Pacific First Mortgage Fund. On 20 July, the Federal Court gave control of the $630 million fund to rival fund manager Balmain Trilogy after a bitter court battle over City Pacific’s decision to suspend distribution for the fund.
Another company associated with City Pacific, small developer CP1 Limited, has been placed into voluntary administration. It is now in the hands of insolvency firm Ferrier Hodgson.
City Pacific has been battling for survival for well over 12 months, since its founder Phil Sullivan first floated the idea of merging with fellow Gold Coast property and finance company MFS when the credit crisis struck in early 2008.
The merger proposal was quickly abandoned after MFS hurtled towards collapse, but the deepening on the credit crisis and a downturn in the Australian property sector meant Sullivan was unable to pull City Pacific out of its death spiral.
Sullivan resigned in November 2008 and was replaced by John Ellis, who has worked hard to try to restructure the company.
But the loss of the First Mortgage Fund, which accounted for almost a third of City Pacific’s revenue, meant the company had little chance of survival.
Like so many Gold Coast companies and entrepreneurs, the slide of City Pacific and Phil Sullivan has been rapid and spectacular.
After City Pacific floated in the ASX in 2001 at $1.10, the company’s shares soared to a peak of $5.39 million and Sullivan’s personal fortune was listed on BRW’s Rich 200 list at $339 million.
Just two years later, the company is in tatters and thousands of shareholders face little prospect of getting any money back.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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