The shock move by Douglas Aerospace comes less than a week after council’s proposed partner in the Bomen freight hub project, Traxion, suffered a similar fate.

Cracks within council ranks in the wake of the Traxion move have widened, with a number of councillors angry at how the two projects have soured, although rules of confidentiality in council have held them back from lashing out publicly.

“If the proper due diligence (on Douglas Aerospace) had been done in 2012 we would not be in this position today, it’s as simple as that,” said Councillor Julian McLaren, who three years ago as president of the Wagga Chamber of Commerce opposed the loan amid fears it would “end in tears”.

Wagga mayor Rod Kendall said council’s loan was safe, with adequate security in place.

“Council’s aim is to foster employment and industrial development in the city, but doing that in such a way that its position is secured,” Cr Kendall said.

“The administrator’s opinion is that we are a valid secured creditor, and council will retain its rights to act in the best interests of council and the community.”

Council was told late Monday that Douglas Aerospace had engaged corporate insolvency firm Armstrong Wily as administrator of the company’s assets and would continue to trade.

Council says loan repayments are up date.

It is understood not all of the $2.5 million loan has been drawn down.

Cr Kendall said the Traxion and Douglas Aerospace projects could not be compared but admitted both companies going into administration within days was not good timing.

Douglas Aerospace principal Doug Clarke held crisis talks at council on Tuesday with administrator Andrew Wily and council representatives, including Cr Kendall and general manager Phil Pinyon.

Speaking before the meeting, Mr Clarke described the move into voluntary administration as a “good thing”.

The company has been mired in an expensive and lengthy legal dispute for more than a year with the hangar builder, Albury-based Indistri Engineering.

In the latest legal manoeuvre, Indistri has filed an application in the Supreme Court to wind up Douglas Aerospace over unpaid bills.

“We have had a builder who is trying to wind us up, we have been in dispute with him,” Mr Clarke said.

Indistri Engineering principal Adrian Robinson declined to comment on the latest development.

Questions are being asked about council’s possible conflict of interest in the hangar project by it being the entity that leases the airport from the federal government, loaned money to Douglas Aerospace and is the building code regulator.

It is understood a number of certificates necessary for occupation of a building have still not been provided to council more than a year after Douglas started working out of the hangar.

The documents include a fire certificate.

Cr Kendall said he was aware council had held concerns about the outstanding fire certificate for some time.

“There have been shortcomings in the fire compliance,” he said.

“The  building was constructed under a private certifier.”

Cr Kendall said he would not comment on possible repercussions for council staff who have had oversight of the Douglas project.

There are fears that if council does realise its security and takes control of the hangar it might be saddled with a white elephant.

Uses for the building would be limited, and the condition of the building is one of the core disputes between Douglas Aerospace and Indistri.

Cr Kendall said the effect of voluntary administration would be Mr Wily taking control of Douglas Aerospace.

“He will be working with the creditors over the next short period with the expectation of putting a position to them as the earliest possible time,” Cr Kendall said.

“He indicated he hoped to continue trading in the long term.

“He did not have a plan of administration today, he was only appointed yesterday.”

There are at least two aircraft in the Douglas Aerospace hangar currently being refurbished.

Cr Kendall said going into voluntary administration was a reaction to a difficult trading position, and early conclusions about the fate of Douglas Aerospace should not be drawn from that.