CBL Corp directors Peter Harris and Alistair Hutchison say they didn't oppose an action heard in the Auckland High Court today to liquidate the company.
The firm's main operating subsidiary, CBL Insurance, was placed in liquidation last November with the Reserve Bank's counsel, Nathan Gedye, QC, saying the prudential regulator had evidence of serious impropriety, chronic insolvency and failure to comply with the central bank's directions.
Then High Court judge, Justice Patricia Courtney, had ordered the immediate appointment as liquidators of Kare Johnstone and Andrew Grenfell of McGrathNicol, who had acted as interim liquidators.
When trading in CBL shares on NZX was suspended in February last year, the company's market capitalisation was $747 million.
Directors Harris and Hutchison say now that they have been unable to get the company's bankers to agree to a Deed of Company Arrangement.
"Unfortunately, even after 15 months, the banks have not seen any material money from the sales of CBLC assets, most of which are still in process, so the very large bank debt has not been reduced," they say in a statement.
"The banks have been prepared to give us time to present a structure for satisfying their debt, and we thank them for that, but with the debt not reduced after 15 months, we can't deal with the total debt and they can't continue to wait until we are just dealing with the residual debt," they say.
While they had enough creditors by number to support a DOCA, they didn't have the creditors by value without the banks.
Harris says the Reserve Bank and liquidator McGrathNicol's opposition to a DOCA "was a devastating blow and their actions over the past 15 months call for an explanation to New Zealand policyholders and creditors and to the public."
The prudential regulator and the accounting firm "both relentlessly focused on putting CBLI into liquidation, as if to simply prove themselves right," Harris says.
The Reserve Bank and McGrathNicol had "offered inducements for the two major creditors, Elite and Alpha, to successfully support liquidation efforts," he says.
That was despite the largest creditor, Elite Insurance, agreeing to take on CBLI's European liabilities at the value recommended by its statutory actuary, PricewaterhouseCoopers and which CBLI adopted in its balance sheet.
"This was a critical example of the market speaking to the numbers. It puts a line through any other expert theoretical estimates of the future liabilities, including estimates that McGrathNicol and the RBNZ chose to rely on in pushing for liquidation," Harris says.
Policyholders and creditors of CBLI, and the public, "also deserve to be told that McGrathNicol has since done this deal – in January 2019 – to pay Elite in full and ostensibly at the PwC recommended and accepted values in the CBLI balance sheet," he says.
"The question is, why was it done in secret without notifying all creditors and why should the largest CBLI creditor get paid in full when not one other creditor or New Zealand policyholder claim gets paid at all?"
Harris says the RBNZ had used values higher than the PwC valuations "to try and justify liquidation in November."
He says the DOCA he was proposing and that RBNZ opposed "would have benefitted all creditors and policyholders of CBLI."
KordaMentha's Brendon Gibson and Neale Jackson were today appointed liquidators of CBL Corp by the High Court.