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Dive brief:
- Detroit-based builder MiG Construction declared bankruptcy last monthaccording to a court filing in the U.S. Bankruptcy Court for the Eastern District of Michigan, following legal disputes over a $30 million city job and debt to its subcontractors.
- The company faced problems with the Dreamtroit project, a $30 million affordable housing development in which MiG is contracted, according to Crain’s Detroit Business. The post reported it MiG filed a lien against the developers of Dreamtroit, claiming they owe the builder $3.28 million, while subcontractors lined up to demand their own payments from MiG.
- In all, the construction company reported having between 100 and 199 creditors, according to the Dec. 19 bankruptcy filing, with $6.28 million in total liabilities. However, MiG noted that the funds would be available for distribution to unsecured creditors.
Diving knowledge:
PJ Jenkins Jr., son of MiG founder Paul Jenkins, told Crain’s he wouldn’t blame any single project for MiG’s problems and compared the business to a basketball game, where “you win and you lose.”
“We have the best relationships and partners out there and, yes, we’ve made some mistakes, but there are some lessons we’ve learned about what kinds of clients we want to work with and what kinds of clients we don’t want to work with,” Jenkins Jr said. . in Crain’s on Dec. 13, six days before the bankruptcy filing.
Some of the largest creditors, according to the bankruptcy filing, are:
Larger creditors
| Name of the creditor | Claim without warranty |
|---|---|
| Selective Insurance Inc. | $1,822,512.27 |
| Mechanical heating and cooling | $376,457.28 |
| Zeeland Lumber & Supply Co. | $337,318.90 |
| Riney Electric | $315,841.45 |
| Sav’s Welding Services, Inc. | $291,153.89 |
SOURCE: US Bankruptcy Court for the Eastern District of Michigan.
Ethan Dunn, managing partner of the law firm Maxwell Dunn, which represents MiG, said in an email that the firm does not comment on active matters.
A difficult environment
MiG Construction’s woes are a sign of the times: Across the country, contractors are struggling in a capital environment where high interest rates knee construction begins last month, and sent them to a minimum of 10 months. In addition, credit institutions such as Silicon Valley Bank and Signature Bank were victims financial pressure that was draining downstream to the builders
Add this to a capital market where there are financing costs dangerously high for developers and builders of large, long projects can find themselves between a rock and a hard place.
“Rising financing costs remain a concern around construction,” said Nicholas McNamara, director of project management at Dallas-based CBRE, in an interview with Construction Dive last year. “Developers are challenged with projects that simply don’t get off the ground because of rising rates.”
He’s not the only builder with this set of struggles either. Makers Line, the construction arm of Salt Lake City-based development company Q Factor, faced at least 15 lawsuits alleging it failed to pay its subcontractors on projects across Utah in November.
