J&P Overseas goes into administration
Cypriot construction has taken a dent to its reputation with J&P Overseas going into administration when its lenders rejected a restructuring proposal after accumulating debts estimated to exceed EUR 500 mln.
Cyprus-based Joannou & Paraskevaides underlined that this in no way affects its own operations as it is legally and financially independent from the overseas firm.
“Joannou & Paraskevaides Ltd is an independent legal and financial entity with exclusively its own funds, assets, financial activities,” it said in a statement.
This is the first seismic jolt to island’s biggest construction company, established in 1946, that employs around 20,000 people.
J&P Overseas alternate director Christos Joannou filed an application at the Guernsey Royal Court to appoint administrators. Earlier this week, Guernsey regulatory authorities approved the appointment of Alvarez and Marsal as administrators for struggling J&P Overseas.
This was done to protect the firm from its creditors and to earn time to broker agreements that would allow the company to complete over a dozen construction projects said to be worth EUR 2 bln.
The company going into administration is aimed at achieving greater value on its assets than would be the case with liquidation.
“This is sought for the purpose of achieving a more advantageous realisation of the company’s assets that would be otherwise affected through a winding up,” a company statement said.
It said that challenging local market conditions, unfavourable final contract settlements, delays in contract receipts and limited financial resources to pursue new projects were to blame.
The firm faced a significant liquidity crunch but sought a viable solution that would keep it going.
“Unfortunately, a comprehensive restructuring plan submitted to the company’s lenders…was recently rejected, which has left limited room for the company to manoeuvre and meet its ongoing obligations,” J&P Overseas said.
The company had submitted a restructuring proposal to around 15 of its lenders prepared by Alvarez and Marsal. This approach involved receiving more loans, so it could cover a EUR 500 mln deficit and take on new projects to generate cash to cover losses and repay loans. Lenders rejected such a scenario. Reportedly, the company was short of working capital and the banks had lost confidence in the ability of major shareholders to turn the ship around.
Orginal shareholders, the Joannou and Paraskevaides families, have lost their stake in J&P Overseas.
“It is expected that under the administration regime the company will have the necessary protection and be in a better position than it would otherwise, to enable it to agree consensual solutions with the clients, lenders and other creditors for the successful completion or other appropriate solutions for each project,” J&P Overseas said.
The company gave reassurances that its directors and administrators “will continue to work with all stakeholders to preserve as much value as possible across the Group”.
J&P said it would continue unhindered with its two Cyprus projects at the Limassol marina and ‘One Tower’ along the coast.
J&P Overseas was established in Guernsey in 1961, almost 20 years after George Paraskevaides and Stelios Ioannou formed the Cyprus company. The company has been instrumental in large-scale infrastructure projects in Cyprus, including schools, hotels, roads and the EUR 100 mln VTTI oil storage terminal at Vassiliko.
J&P Overseas initially undertook projects in North Africa before expanding to the Gulf and Saudi Arabia in the 1970s. It was the biggest and most successful Cyprus-owned company operating abroad, but cracks began appearing in recent years after changes were made at senior management level.