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SMEs stranded as rail sub-contractor goes bust

$2m cheques issued by Samdaiyang Development to local firms bounce

[SINGAPORE] Just months after a Downtown line main contractor went bust, a sub-contractor working on another part of the rail network has also become insolvent.

This has left a handful of small and medium-sized enterprises (SMEs) in Singapore holding some $2 million in bounced cheques.

The Korean company in question, Samdaiyang Development, was the sub-contractor for Hyundai Engineering & Construction Co, which in turn was awarded the $188 million Contract 931 for the construction of MacPherson station, to link Downtown Line 3 to the Circle Line.

Eight SME contractors BT spoke to said they had stopped working in September this year, after post-dated cheques issued by Samdaiyang Development had bounced and workers from Samdaiyang Development did not turn up at the site.

They have not been paid since April, and are owed different amounts, ranging from $4,280 to $1.14 million.

When they turned to the main contractor, Hyundai Engineering and Construction, for help, they were told to file their claim submissions at the Seoul Central District Court, as Samdaiyang Development had filed for insolvency.

"In accordance with the Korean Law, as stated in the Debtor Rehabilitation and Bankruptcy Act, we wish to inform you that the official dates for reporting of Receivable Claim for debts owed by Samdaiyang Development Co Ltd are between November 21, 2013 and December 5, 2013," Hyundai Engineering and Construction said in an email titled "Information to Samdaiyang Creditors".

Hyundai could not be reached for further comment.

This is not the first time that cheques issued from Samdaiyang Development have bounced, according to the contractors BT spoke to.

In one case, Samdaiyang Development said it would retract its original cheque and reissue a post-dated cheque for the entire sum owed to one local contractor, after the SME approached the Korean firm for payment. The second cheque also bounced, leaving the SME with a $202,800 hole in its pocket.

One of the creditors said the issuance of post-dated cheques is not common in the industry, but they accepted it "based on trust", given that the job was ultimately commissioned by the Land Transport Authority (LTA) and the fact that Hyundai Engineering and Construction is a big player in the local market.

In addition to its extensive experience in the construction of rail infrastructure projects in Korea, Hyundai Engineering and Construction has worked on several rail projects in Singapore, including the construction of several North East Line (NEL) stations and the NEL depot.

Separately, Samdaiyang Development was registered in Singapore in October 2012, based on ACRA (Accounting and Corporate Regulatory Authority) reports. It is listed on the Building and Construction Authority's directory of registered contractors and licensed builders as a "General Builder Class 2", which means it is restricted to undertake projects of $6 million or less.

The firm's filing for bankruptcy comes a few months after Austrian construction firm Alpine Bau GmbH filed for insolvency in June.

Alpine won the contract for the design and construction of the King Albert Park, Sixth Avenue and Tan Kah Kee MRT stations and tunnels along Downtown Line Stage 2, valued at $670.74 million, in 2009.

LTA has since picked two companies to take over the project - Australia's McConnell Dowell (SEA), which will complete the building of the Sixth Avenue and King Albert Park stations and associated tunnels for about $254 million, and Korean group SK E&C (Singapore), which will complete the Tan Kah Kee station and associated tunnels for about $222 million.

In the latest incident, Hyundai has also appointed a new sub-contractor, and works are still ongoing at the site.

Downtown Line 3 is the final stretch of the 42-kilometre Downtown Line. When completed in 2017, Downtown Line 3 is expected to enhance rail connectivity in the eastern corridors to the central business districts and developments in the Marina Bay area. It comprises 16 stations, including three interchange stations: MacPherson, Tampines and Expo.