Family business goes bankrupt just before Christmas – E24

Espen Mattson and his father ran up their debts in a desperate attempt to save the family business. On that little Christmas Eve, it was over.

Nine people are out of a job after the family business Esmabygg Anlegg AS was declared bankrupt by the Trøndelag District Court on Wednesday.

– It is very difficult to end like this. Especially this happens in the middle of Christmas. Managing Director and Chairman of the Board Espan Madsen says.

– I think about my colleagues who are now out of work. He says it was painful and difficult to announce that their December salary would not be paid in January.

The building and construction industry is one of the industries hardest hit by the economic storm with rising interest rates and strong price growth.

Bankruptcy joins the construction industry's dire bankruptcy statistics. BizWeb reports that 1,128 construction companies have gone bankrupt so far in 2023. In the previous three years, the number of bankruptcies in the same sector ranged from 795 to 839.

– Leave the black pepper behind

The father of three from Trondheim co-founded the company with his father Anders Madsen in 2012 after running his own business as a carpenter for four years. Father and son held half shares each.

The construction company received work from companies and private individuals and developed its own housing projects.

Espen Mattson says the company ended up in a liquidity crisis as a result of non-payment of a total of NOK 4.5 million from two customers.

– The decline began with a difficult private client. We finished the job, but we left more than two million kroner in black money in the form of unpaid claims, says Madsen.

– In addition, we received a claim of more than two million kroner related to a building we previously sold, for an error beyond our control, he adds.

The house is not sold

At the same time a dispute with two clients dragged on, adding to the cash crunch. The company was unable to sell a semi-detached house they had built in Trondheim.

– We got valuations from four estate agents to make sure the property was priced right, but still not close to being sold at a fair price. At the same time, Madsen says, construction loan interest rates continued to rise and rise.

Eventually, the equity was completely eaten up. In the Trøndelag District Court, the company claimed NOK 23.5 million in debts and approximately NOK 16 million in assets.

– Bitter

Madsen says he and his father went to great lengths to try to save the family business.

– My father and I personally spent as much as we could and borrowed as much as we could to raise equity and keep the company alive. Eventually it got too heavy, he says.

Madsen says the company courted private investors, which didn't lead to success. When they received a note from the bank on Thursday, December 21, after a final push, they had no choice but to stop operations.

– I called a board meeting the next day where we decided to call for a tender. “We don't want to act at the expense of the debtor,” he says.

Matson did not hide his bitterness.

– For a long time, I thought we would ride out the storm by bringing in new money or finally getting some of the millions we owe. Then last year's deficit can be converted into profit. On the contrary, he says, we live on debt.

Attorney Guy Stephenson was appointed trustee after the bankruptcy.

– The company has been struggling with cash flow problems for a long time. My initial impression is that the general manager has tried to get financing from banks and private investors. When this did not succeed, it decided to call for a tender because it did not want to operate at the borrower's expense, he says.

Stephenson, who has handled bankruptcy estates for many years on behalf of the Trøndelag District Court, says that in 2023 there were more bankruptcies than usual among players in the building and construction industry.

– Business may seem to have bad times. “We've had several major bankruptcies among local contractors and other players in construction,” Stephensen says.

Eirik Gjelsvik, CEO of contractor firm Bagin Group, recently told E24 that frequent interest rate hikes are “killing the industry” and that the group has already been forced to lay off 45 employees.

Since then, the policy rate has been raised by another 0.25 percentage points.