The Inland Revenue Department is among creditors owed money by Graeme Hart's UCI Holdings, the autoparts business that filed for bankruptcy in the US to restructure what became an unmanageable debt.
In the High Court in Auckland, Justice Matthew Palmer today granted an application which would empower the Chapter 11 filing UCI made under the US Bankruptcy Code, which effectively lets the company reorganise its business while retaining control of the assets to prevent creditors from mounting legal action.
As at June 2, UCI owed Credit Suisse and Hart's Rank Group Finance Holdings US$69 million under a revolving credit arrangement, US$400 million to bondholders, NZ$5.2 million in related party debt, and NZ$7 million to the IRD, the judgment shows.
Last week UCI filed for bankruptcy after missing a US$17.3 million interest payment to bondholders in February, having exercised a 30-day grace period and convincing the majority of noteholders not to enforce a default.
"The group's current balance sheet seems to have become unsustainable. Without restructuring it seems the group will be unable to comply with its debt obligations," Justice Palmer said.
Counsel for Brian Whittman, who was appointed to restructure UCI under the bankruptcy filing, submitted without the order one of the company's creditors could seek to enforce a security interest and take control of UCI's shares.
Justice Palmer said there wasn't any evidence assessing the chance of that occurring, but accepted that finding such evidence would be difficult.
"And the consequences of the risk eventuating would be significant," the judge said. "I am satisfied there is a risk that the substantive relief could be rendered nugatory if interim relief is not granted."
The filing includes the company's US businesses - Airtex Products, ASX Industries and Champion Laboratories - but not Hart's Autoparts Holdings.
The New Zealand billionaire started building the auto parts business when he was most of the way through creating a much larger empire in the packaging sector, Reynolds Group Holdings, using junk bonds to fund both expansions when near-zero interest rates around the world left investors clamouring for real returns.