Dive Brief:
- Detroit-based builder MiG Construction filed for bankruptcy last month, according to a court filing in U.S. Bankruptcy Court for the Eastern District of Michigan, following legal disputes at a $30 million job in the city and debt to its subcontractors.
- The firm faced issues on the Dreamtroit project, a $30 million affordable housing development that MiG is contracted on, according to Crain’s Detroit Business. The publication reported that MiG filed a lien against Dreamtroit’s developers, alleging they owed the builder $3.28 million, while subcontractors lined up to demand their own payments from MiG.
- All told, the construction company reported it had between 100 and 199 creditors, according to the Dec. 19 bankruptcy filing, with $6.28 million in total liabilities. However, MiG noted that funds would be available for distribution to unsecured creditors.
Dive Insight:
PJ Jenkins Jr., son of MiG founder Paul Jenkins, told Crain’s that he wouldn’t blame any single project for MiG’s issues, and compared the business to a game of basketball, where “you win some, you lose some.”
“We’ve got the best relationships and partners out there and, yes, we made some mistakes but there are some lessons that we’ve learned about what types of clients we want to work with and what types of clients we don’t want to work with,” Jenkins Jr. told Crain’s on Dec. 13, six days before the bankruptcy filing.
Some of the largest creditors, according to the bankruptcy filing, are:
Largest Creditors
| Name of Creditor | Unsecured Claim |
|---|---|
| Selective Insurance Inc. | $1,822,512.27 |
| Mechanical Heating & 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: U.S. Bankruptcy Court for the Eastern District of Michigan.
Ethan Dunn, managing partner at law firm Maxwell Dunn, which is representing MiG, said in an email that the firm doesn’t 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 kneecapped construction starts last month, and sent them to a 10-month low. In addition, lending institutions like Silicon Valley Bank and Signature Bank, were victims of financial pressure that trickled downstream to builders.
Add that to a capital market where financing costs are dangerously high for developers and builders on large, drawn-out projects can be put between a rock and a hard place.
“Increased 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 are not penciling due to increased rates.”
It’s also not the only builder with this set of struggles. Makers Line, the construction arm of Salt Lake City-based development firm Q Factor, faced at least 15 lawsuits alleging it didn’t pay its subcontractors on projects across Utah in November.