CBL Insurance's interim liquidators’ application to make a deal with its largest creditor Elite Insurance, to remove liabilities owed to it, has been dismissed by the High Court.
In August, Elite and interim liquidators of CBL Insurance reached an agreement that would have seen Elite write off all CBL Insurance’s liabilities in exchange for a mixture of cash and non-cash assets. The amounts involved were not disclosed. At the time, interim liquidators Kare Johnstone and Andrew Grenfell of McGrathNicol reportedly argued the agreement would benefit all CBL Insurance’s creditors.
An article by Newsroom detailed the court ruling on the proposed deal. Justice Patricia Courtney noted arguments raised in opposition, including that it was unreasonable for an interim liquidator to pay some 85% of the company’s cash to a single creditor. She found that to execute the deal would exceed the powers of interim liquidators.
“Although the interim liquidators do have the powers of a liquidator, they may only exercise those powers for the purpose of maintaining the value of the company’s assets and, in my view, that is not the case here,” Courtney said.
Newsroom reported the Reserve Bank of New Zealand (RBNZ) had consented to the application but CBL Insurance’s second largest creditor, Alpha Insurance, CBL Insurance itself and its shareholder, LBC Holdings showed “strenuous opposition.”
Now, RBNZ, in a statement, said it supported the transaction negotiated by the interim liquidators but accepts the court’s finding that it cannot be implemented in interim liquidation.
“This outcome reinforces the Reserve Bank’s desire for the full liquidation of CBL Insurance,” it noted.