Eric Watson's Cullen Group has abandoned its appeal against a $112 million tax judgment, while a second liquidators' report shows significant intercompany debts.
Last December, KPMG's Vivian Fatupaito and Luke Norman were appointed liquidators of several Watson-linked companies after the High Court declined to halt insolvency proceedings brought by the Inland Revenue (IRD) against Cullen Group.
The tax department had been pursuing liquidation after Justice Matthew Palmer ruled in March 2019 that Cullen Group was part of Watson's "web of entities" designed to avoid paying non-resident withholding tax.
IRD won a $112m High Court tax judgment against Cullen Group, which was then appealed. However, a second liquidators' report released last week shows the appeal has been abandoned.
"Having obtained legal advice on the probability of success of the tax appeal and considered the costs associated with the appeal, the liquidators decided against proceeding with the appeal and filed formal notice with the court to this effect," the report reads.
The total debt owed to IRD now totals about $118.5m.
The report also showed the Cullen Group now owes Bendon Group $55m. Bendon Group was home to the lingerie company that Cullen Group bought in 2002 for $58.7m.
In 2018 Watson, a former NBR rich-lister, merged the business with Nasdaq-listed US sleepwear company Naked Brand Group and later sold down his shareholding.
When detailing the group's assets, the report said Cullen Investments was the main asset holding company within the Cullen Group.
Cullen Investments had cash at bank of $30,388, which was transferred to the liquidators' trust account on appointment.
"In addition, cash of $15 was recovered from Cullen Investments' registered office," the report reads.
"It appears that a number of assets recorded in Cullen Investments balance sheet are either unrecoverable, have purportedly transferred to another party, written off or are uneconomical to pursue. The liquidators continue to investigate these assets and an update will be provided in our next six-monthly statutory report."
However, potentially the largest asset of Cullen Investments identified to date is a loan of $17.5m provided to a US incorporated company, Hart Agriculture Corp, formerly known as Hart Acquisitions LLC (Hart).
"We understand this entity is owned by Richard Watson, the brother of Eric Watson. Cullen Investments has security over land in respect of this loan. The Liquidators are continuing to review the documentation and security position," the report states.
Another asset of Cullen Investments was Batty Road Holdings Limited (BRHL).
"The liquidators were made aware that BRHL owned a collection of art which was for sale with several art dealers," the report reads. "The liquidators corresponded with the dealers to establish an appropriate strategy for marketing and selling this artwork."
The artwork was listed in several auctions and to date $44,957 has been realised, while several unsold items remain and the liquidators continue to find a buyer.
An initial distribution of $50,000 from the sale of a race horse owned by subsidiary Watson Bloodstock Limited has been made to Cullen Investments towards liquidation costs.
Separate from the IRD judgment, the London-based Watson and two other entities linked to him had previously been told to pay more than £43.5m ($85.5m) plus accruing interest to fellow Kiwi businessman Sir Owen Glenn.
That came after the UK High Court ruled that Glenn's company Kea Investments was entitled to compensation having established that Watson had engaged in "deliberate deception" when setting up a joint venture called Spartan Capital.
Meanwhile, one of Watson's trusts has claimed more than half a billion dollars in the liquidation of Cullen Group.
Jersey-registered Novatrust is listed as a creditor with a general security agreement stated as $513.4 million in the report, but it is not clear if the liquidator accepts this claim.
"Discussions with the secured parties remain ongoing in this regard and as such the liquidators are unable to provide any further details in this regard at this time," the report said.
Novatrust was involved in Watson's dispute with Glenn as the trust which advanced funds into their joint venture.