THE Gold Coast Titans’ debt-ridden property arm faces a bankruptcy hearing next month after a Federal Court ruling today allowed a major creditor to begin wind-up proceedings.
The court gave Reed Constructions permission to seek $1.046m from the Titans' property arm placing further strain on the Gold Coast NRL club, which reportedly has debts totalling $35 million.
The court set the matter to be dealt with on April 20, which gives the Titans’ property group less than 30 days to prove its solvency and avoid being declared bankrupt.
Titans boss Michael Searle could not be contacted for comment, but has released a statement through the club.
“Despite cash flow projections showing a current shortfall of approximately $2.5 million dollars, The Football Club is projecting a profit in season 2012,” says Searle.
“The current is shortfall is a result of poor home crowds on the back of a disappointing 2011 season, the ongoing servicing costs associated with the building dispute in 2010 and the overall economic downturn on the Gold Coast.
“Our initial discussions with the NRL revolved around the safeguarding of both the Property Trust and the Football Club. After consultation with the ARLC (Australian Rugby League Commission), there are now two strategies in relation to the Football Club and the Property Trust.
“Going forward the Football Club on its own, is profitable and sustainable. Our current discussions with the ARLC are focused only on the Football Club funding to ensure its longevity and sustainability.”
“The ARLC has been fully briefed on this situation throughout and we are confident that with the full support of the Commission we will ensure the Titans remain a viable and competitive force in the NRL for many years to come.”
The Titans have been working with NRL Management and the ARLC since September on a funding submission to assist with cash flow pressures.
“The pressure on the property arm came about because of the original Centre of Excellence building dispute which caused an escalation in costs relating to the completion of the building, additional rectification works and legal and funding costs totalling $6 million on top of the original contracted building amount,” says Searle.
“We will consider all options to sell the asset in a managed and transparent process with our bankers. We have received two formal expressions of interests to date which we are considering.
Reed Constructions claims it is owed $943,858 from work completed on the Titans’ Centre of Excellence at Robina several years ago. Its claim includes interest of more than $100,000.
In court today, the company successfully sought to replace the Australian Taxation Office as plaintiff against Gold Coast Titans (Property) Pty Ltd.
The ATO used the hearing to ask the court for leave to withdraw from proceedings after it advised an undisclosed prior arrangement had been made with the Titans property arm.
Solicitor Ashley Tiplady, for Titans Property, told the court his client agreed a prima face case exists that the property group is insolvent.
The court ruling is the latest setback for the Titans, who have won just a single game so far in the 2012 NRL competition.
The Australian Rugby League Commission has asked external accountants to audit the club’s finances. The NRL has also declined to offer any further financial bailout for the beleaguered club so far.
However, NRL boss David Gallop says he is determined to keep the Titans afloat while admitting the organisation is under ‘considerable financial stress’.