A dispute between two large contractors at Changi Airport's Terminal 4 is inflicting serious cash-flow problems on a group of local subcontractors.
The dispute between Acesian Star and main T4 contractor Takenaka Corp is creating ripple effects that are squeezing four subcontractors. Acesian Star, a unit of Catalist- listed Acesian Partners, is battling Takenaka over the value of work it carried out and various deductions imposed by the Japanese company.
Acesian Star is now in judicial management after going cash-flow insolvent, according to Mr Wong Kok Chye, Acesian Partners' group chief executive and executive director, in court papers.
The move has created huge problems for four subcontractors that Acesian Star hired to do air-conditioning and mechanical ventilation work for the company.
The four firms said they are owed more than $5.2 million but cannot start enforcement proceedings to recover the money because Acesian Star is now in judicial management.
They are among 118 unsecured creditors who are owed about $37 million by Acesian Star as of March 20, according to the judicial manager Deloitte & Touche.
"The four subcontractors feel they have been drawn into the dispute between Takenaka and Acesian Stars," said Mr John Lim, a partner of law firm Malkin & Maxwell and a member of the creditors' committee.
"These subcontractors expended time, supplied materials and deployed manpower to the (T4) project.
"Despite the successful completion of the terminal's construction, they have not been fully paid for work carried out. Such non-payments would invariably affect cash flow of many subcontractors."
Acesian Star, which is claiming damages of at least $22 million from Takenaka, told the Japanese firm in February that it intended to refer the disputes to arbitration under the Singapore International Arbitration Centre.
But for the subcontractors, they are uncertain as to what the arbitration process will mean for them.
"It's not just an issue of whether arbitration should proceed. It's a question of who will fund the arbitration," said Mr Lim, who represents See Ho, one of the four subcontractors.
The director of one subcontractor who declined to be named told The Straits Times: "If the matter between Takenaka and Acesian Star goes to arbitration, it may take three to five years.
"By then, my company may close down unless we get a bank loan to finance other ongoing projects. Acesian Star's non-payment for the electrical work we did has crippled our cash flow."
See Ho director Angelia Ang said she has had to repatriate more than half of the 100 foreign staff who had worked on the T4 project, and the firm still owes money to its suppliers and subcontractors for work done on T4 because of Acesian Star's non-payment.
T4, which cost an estimated $985 million to build, is expected to open in the second half of this year.