Bankruptcy for Pihl
29 August 2013
Danish contractor E Pihl & Søn has filed for bankruptcy , claiming that attempts to find a financial solution to secure the continued operation of the company had been in vain.
One of Denmark’s oldest contracting companies, it was founded in 1887 and has a presence in 15 countries. It has been carrying out building and civil engineering works in Denmark, Norway, Sweden, the UK, the North Atlantic Area, the Caribbean and Africa, as well as the Middle and Far East.
The company’s 2012 annual report explained that the main causes of Pihl's financial difficulties had revolved around three main factors.
It said the company had, for a number of years, expanded “far too aggressively” in Denmark and abroad. Also, the company had what it claimed were substantial claims against third parties. Thirdly, the company incurred costs that had not been provided for relating to post-completion work on a number of projects.
It said that expansion had taken place without sufficient balance in the contract terms and without having sufficiently verified the credit quality of the foreign customers and sub-contractors. It added that the expansion had been without ensuring that the quality of the work processes and the risk management procedures were sufficient to support the increase in activity level.
The value of claims on third parties, it said, was based on estimates and required re-validation, but it added that the board of directors had been working for the past year to rectify these problems.
In the 2012 annual report, it was said that in December of 2012 and spring 2013, the company had concluded agreements with the largest financial creditors to secure the solvency and liquidity required for operations to continue. At the time, of the publication of the 2012 annual report, a change in management was announced.
Following this change in management, the company was reorganised and new managers were assigned to review the projects. The board said that it turned out that there were Danish and foreign projects on which the write-downs and provisions made were insufficient, and so the actual amount of write-downs required had proved to be greater than expected.
Also, it said that on one project, accelerated completion had led to increased costs which the customer would not pay, and it added that the matter was now awaiting arbitration.
These new events and information challenged the solvency and liquidity of the company, said the board.
Together with the largest financial creditors, the board has struggled to establish the framework for a new recapitalisation to ensure the viability of the company, but it said that on 25 August, it became clear that it would not be possible to find a solution that could secure the continued operation of the company.
The board acknowledged that the bankruptcy would have “great and far-reaching negative consequences, financially and personally, for many skilful employees, for owners of construction projects, for partners and for subcontractors and suppliers. It is terrible to have to make a decision that will affect the day-to-day lives and financial foundations of so many people and businesses.”