The Real Deal New York

A federal judge ordered Navillus to pay unions $76M. Here’s why the contractor is only paying $26M

Deal will allow the company to exit bankruptcy
By Kathryn Brenzel | August 25, 2018 09:09AM

In a deal that will allow Navillus to exit bankruptcy, the concrete contractor will pay less than half of the $76 million settlement that a group of construction unions won against the company last year.

If its reorganization plan is approved, Navillus will pay five unions a total of $25.7 million — a significantly lower sum than the group was granted in September, when a federal judge ruled that the contractor cheated the unions out of pension fund contributions. A confirmation hearing for the plan is slated for Oct. 5, according to court documents.

Navillus announced last week that it had reached a deal with the unions to toss the $76 million judgment, which had forced the company into bankruptcy in November. At the time, details of the agreement weren’t made public.

Though the new sum is a deep discount from the original settlement, court documents filed in federal bankruptcy court on Friday note that the alternative was “lengthy and expensive litigation” that “would likely result in a significantly reduced and delayed distribution to unsecured creditors.” The unions were among the top 20 unsecured creditors, and collectively had $150 million dollars in claims against Navillus, court documents show. In other words, the deal might’ve been the unions’ best shot at recouping as much money as possible.

Under the reorganization plan, unsecured creditors receive 10 percent of their claim or their proportional cut of a $600,000 fund, whichever is less.

An attorney for the unions didn’t immediately return a request seeking comment.

In 2014, five union benefit and pension funds accused Navillus of evading agreements to use union labor on its projects through an alter-ego company owned by its CEO Donal O’Sullivan’s brother, Kevin. Navillus filed for bankruptcy two months after a judge ruled in the unions’ favor and appealed the judgment.

“While I’m confident we would have won the appeal, in the agreement recently announced, the judgement will be vacated — meaning that the Navillus name, along with my own, will be left untarnished,” O’Sullivan said in a statement. “This is incredibly important and will allow us to move forward and grow as we bring in new work. We look forward to putting this behind us, as we continue to work on New York City’s biggest projects.”