CBL Insurance liquidation inevitable as directors retreat

Peter Harris, managing director of financial risk insurer CBL Corporation.

Directors of stricken insurance company CBL are understood to have withdrawn their opposition to the Reserve Bank's application to liquidate subsidiary, CBL Insurance, following significant developments over the weekend.

A long-awaited High Court hearing was set down for tomorrow, but the Herald understands it is now unlikely to go ahead after the central bank gained the support of two major overseas creditors for a wind-up proposal.

Liquidation is therefore inevitable with CBL directors Peter Harris and Alastair Hutchison unable to advance their own stated restructuring proposal without the support of large European creditors Elite Insurance and Alpha Insurance.

CBL Insurance is the New Zealand supervised arm of NZX-listed construction risk insurer CBL Corp, which was placed in voluntary administration in February owing hundreds of millions of dollars while shareholders face total losses.

Gibraltar-based Elite Insurance is CBL Insurance's largest creditor, accounting for about 68 per cent of CBL Insurance's claims liabilities.

CBL Corporation shares listed on the New Zealand sharemarket in October 2015 at $1.73 and the stock rose to more than $3 two years later, valuing the company at nearly $750 million before the trading halt and its insurance units being forced to wind down.

CBL Corp's voluntary administrators, Brendan Gibson and Neale Jackson of KordaMentha, have put off watershed meetings, pending the outcome of CBL Insurance's fate.

CBL's founding directors Harris and Hutchinson were understood to have cobbled together a deed of company arrangement, or restructuring proposal, as an alternative to liquidation, with the aim of providing a solvent outcome for CBL Insurance and full payment to its New Zealand creditors and policy holders.

However, no details were publicly released.

On Friday, the Reserve Bank gained the support of Elite and Alpha, effectively scuttling any chance of the director's proposal gaining any traction and therefore making the liquidation legal action pointless.

The Reserve Bank had been reviewing the adequacy of CBL's reserves for its French construction business as far back at July 2017.

It is expected that Harris and Hutchison will make a statement later tomorrow.

Last week the administrators announced they'd reached an agreement to sell CBL's Australasian subsidiary Assetinsure for an undisclosed sum to Lombard Australia Holdings Pty Limited.

In September they announced the sale of the group's UK-based European Insurance Services Limited business to Phoenix Holdings Limited.