A FORMER director has stepped in to employ staff and buy part of a well known Lake Macquarie engineering firm that was placed in liquidation last month, but there is little hope unsecured creditors will see the $1.6 million they are owed.
Redhead's Down Under Control was voluntarily placed in the hands of liquidator Jeff Shute, of Shaw Gidley Insolvency Reconstruction, with debts of more than $2 million.
Customers and creditors of the mining-supply business received notification this month that another company, Stanton Consulting Services, also known as SCS Services Rig, had bought part of the business.
SCS Services Rig is owned and controlled by Gemma Stanton, of Thornton, who briefly served as a director and secretary of Down Under Control last year.
Ms Stanton worked as a consultant to Down Under Control for about 18 months to January.
She told the Herald on Thursday that she received a call from workshop staff asking for help when the company was placed in liquidation in May.
"We tried to have the liquidation stopped but we couldn't get the support needed to get that across the line," she said.
"The only other alternative was to buy the assets and try to keep the remaining workforce together. I felt terrible for them, these blokes have worked together for 30 years.
"I had absolutely no say in what happened to Down Under Control, I am not a shareholder or a director so didn't get to make any of those decisions.
"This is all about just trying to keep 10 people in jobs."
Ms Stanton served as a director of Down Under Control for about six weeks last year, but said the arrangement did not work out.
Ten remaining Down Under Control staff have been employed by SCS Services Rig.
They will manufacture drill heads from a workshop in Cardiff.
It's understood Down Under Control turned over up to $10 million annually and the new business aims to turnover $1 million.
A letter was sent to Down Under Control clients this month from SCS Services Rig seeking permission to redirect goods to the new workshop.
"We will be around in the next few weeks to visit everyone although you will be dealing with the same people you have prior except for the two directors," the SCS Services Rig letter reads.
A creditor, who asked not to be named, said unsecured creditors would be left out in the cold under the deal.
"There is a lot of money still owed to a lot of people and the chance of us getting it back is probably zero," he said.
Down Under Control manufactured and repaired roof bolting machines for the mining sector.
An initial creditors' report indicates that the company had been experiencing financial difficulties since October last year.
According to Australian Securities and Investments Commission documents, Down Under Control had a revolving door of six new directors appointed since July last year and all resigned before the company went under.
Manfred Luttenberger, of Belmont, was appointed as a director in July 2017 and resigned in April.
He was replaced by Ken Moroney, of Belmont, who was the sole director when the company was placed in liquidation.
Mr Luttenberger and Luttenberger Enterprises owned the company.
According to the liquidator's report, Mr Luttenberger was seeking advice about the company's financial position since October.
The former long-term director and shareholder of Down Under Control John Wood, of Nords Wharf, passed away in 2017.
Employees are owed about $200,000 and $1.6 million is owed to unsecured creditors, including about $1.2 million to former directors.
Mr Shute said it was "unclear" at this early stage if there would be any return for unsecured creditors.
"Our investigations into the failure of the business are ongoing, however, preliminary investigations suggest that cashflow constraints, and the inability to source additional funding, resulted in critical suppliers placing the company on stop supply which ultimately lead the director and shareholders to place the company into liquidation," he said.
"Creditors will be provided with an update on the status of the liquidation and my investigations, together with details of the likelihood of a dividend, if any, within the next three months."