Jennian Homes Otago Ltd - with mounting debts of over $500,000 to 93 creditors - has put forward a proposal to creditors to stave off receivership or liquidation, following a more than 50% decline in home sales for the six months to March.
It is the fourth Dunedin-based branded-building franchise company to fall into financial difficulties in as many years - two being separate Signature Homes franchisees owing about $2.4 million at their respective liquidation dates and a Landmark Homes franchisee owing more than $800,000.
Jennian Homes Otago owners are understood to be proposing to put in more than $100,000 cash and pay the majority of creditors 20c in the $1, which would amount to about $115,000 paid out, and continue to trade - on the proviso 75% of the 93 creditors accept the proposal by July 20.
When contacted, Jennian Homes Otago manager Kurt Reed, who has been operating for almost three years, said home sales during the six-month period had fallen from 11 to two, while overhead costs continued.
"Our intention is to pay everybody we possibly can; it's what we want to do. We have borrowed money to put back in," Mr Reed said.
Dave Wilson, business development manager for parent franchise company Jennian Holdings Ltd in Tauranga, said when contacted housing consents were down about 60% and "the housing industry is in exceptionally difficult times".
"Of course no builder is immune to the severity of these extremely challenging times, but in nearly 30 years Jennian has never failed to complete a customer's home and we intend for the record to continue," he said in a statement.
He hoped Mr Reed would be able to work a successful compromise with the creditors and continue to trade.
In a letter to creditors posted on Monday and yesterday leaked anonymously to the Otago Daily Times, Insolvency Management Ltd liquidator Ian Nellies outlined the proposal, saying $581,731 was owed to 93, mainly Otago, unsecured creditors, while a forced sale of assets "might" fetch about $35,000.
"Obviously ... there would be very little [available cash] for creditors," Mr Nellies said.
After a more than 50% home-sales downturn, Mr Nellies said there were "improving sales", with five Jennian homes under construction and five ready to start awaiting consents.
"It is anticipated that with the creditors' support the company can continue to trade and would continue to utilise existing suppliers going forward," Mr Nellies said.
Registered company Jennian Homes Otago Ltd was incorporated in November 2007, with its sole director listed as Paula Reed of Mosgiel.
Its 100% shareholder is registered company Southland Holdings Ltd, incorporated in May 2005, whose directors are Kurt and Paula Reed, according to the Companies Office registry.
Mr Nellies said: "We have been advised that the company's cash resources have been exhausted over the past few months due, in the main, to the lack of sales and continued fixed overheads."
Mr Nellies said a section and car had been sold by Jennian's management and they were taking out a personal loan of more than $100,000 to put into the company, if 75% of creditors accepted the proposal.
"These funds will only be advanced to the company on the stipulation that the proposal being put forward is accepted by the creditors," Mr Nellies said.
Debts of less than $1100, which totalled $15,300, would be paid in full, while those above $1100 would get 20c in the dollar.
July invoices would be paid under "normal terms of trade".
Mr Reed wanted "small businesses" paid in full.
Jennian Homes Central Otago Ltd is a separate franchise and company and is unaffected by the creditors proposal of Jennian Homes Otago Ltd.
