The Victorian government is set to lose millions of dollars it invested in a scrap metal recycling company, after the business went into administration earlier this year.
The Victorian Business Growth Fund investment in Pacific Metal Group, reportedly worth $10m, will probably be lost after the company collapsed in January after a fire at its scrapyard in Laverton North.
A government spokesperson on Wednesday said Pacific Metal Group was one of seven businesses it had invested in under the fund, which it established in 2020 with Aware Super and Spirit Super to help small-to-medium sized businesses grow.
They said the fund was independently managed by fund managers Roc Partners on behalf of the government.
“We established the fund in 2020, alongside Aware Super and Spirit Super, to support jobs in key sectors and drive innovation, economic growth and environmental improvements,” the government spokesperson said.
“The fund has so far invested in seven businesses and all other investments are performing well and delivering on the objectives of the fund.”
Announcing the investment in the business in October 2022, the treasurer, Tim Pallas, described it as a “win for everyone”.
At the time, Pallas said the government’s investment would enable Pacific Metal Group to upgrade its processing and collections infrastructure and possibly acquire smaller scrap metal businesses.
He said the business employed 36 people and its management had been in the industry for more than 30 years.
“Investments in these companies will support jobs and the environment, and that’s a win for everyone. The Business Growth Fund is an important vehicle to help dynamic Victorian businesses take the next step,” Pallas said.
According to a report to creditors by liquidators from Wexted Advisors, seen by Guardian Australia, the company has been assessing Pacific Metal’s cashflows on behalf of Roc Partners since early December.
In late December, Wexted said the company was insolvent and ineligible for safe harbour bankruptcy protections because it had missed tax filings.
Wexted contacted larger firms KordaMentha and McGrathNicol in early January to offer the administration job. But both declined in the wake of the 2 January fire.
Korda Mentha cited “uncertainty associated with remediation action required by the Environmental Protection Authority, and a fire incident” as their reason.
Wexted notified creditors of its appointment as administrator on 16 January. According to the report, it is hoping to get deals to sell Pacific Metal’s two parts this month.
It will also continue to work with the Environment Protection Authority to remediate the Laverton North site and noted it was not accepting any new material.
Wexted refused to comment when contacted by Guardian Australia.
The Victorian opposition said the rapid collapse of Pacific Metal Group raised “serious integrity questions” around the due diligence it undertook before investing in the company.
“Labor’s scrap metal investment has turned to junk, and the Allan government must explain what due diligence was done, and what processes were followed that resulted in losing $10m of taxpayers’ money propping up a scrap metal yard,” the Coalition’s industry spokesperson, Bridget Vallence, said.
“Victorian industry needs a real plan to support growth, innovation and development, not wasting money taking on a debt stake in organisations that only leaves taxpayers worse off at a time when they can least afford it,” Vallence said.
She said the government had committed to further private sector investment, via its State Electricity Commission and Breakthrough Victoria – an independent company that manages a $2bn investment fund.
