News release
13 May 2019
CBL Directors Alistair Hutchison and Peter Harris withdraw opposition to liquidation
CBL Corporation Ltd (CBLC) Directors Alistair Hutchison and Peter Harris advised today that they have been unable to
obtain the agreement of the company’s bankers to the terms of a proposed Deed of Company Arrangement (DOCA); and as a
consequence they have decided not to oppose an application for the liquidation of CBLC, to be heard in the Auckland High
Court on May 13 2019.
“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,” said Mr Harris, “so the very large bank debt has not reduced.
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.
“Although Alistair and I consider that we have the creditors by numbers to support the DOCA, we don’t have the creditors
by value required without the banks’ agreement.”
Chinese banks first applied for liquidation of CBLC in May 2018 in order to maintain their rights to an inter-bank only
situation, and that liquidation application is finally being heard on Monday 13 May. “Despite our efforts, CBLC will go
into liquidation,” said Mr Harris.
The determination by McGrathNicol and the Reserve Bank (RNBZ) to oppose the proposed CBL Insurance DOCA in November
2018, which would have provided a viable commercial pathway, 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, said Mr Harris.
CBLI had resolved to strengthen its reserves in February 2018 to the level recommended by its statutory actuary (PwC),
had started the capital raising process, and had announced that it would stop writing the problematic long-tail French
construction business. It had also appointed international experts to sell its two French producer brokers as going
concerns with significant value.
Its parent CBL Corporation could have taken this action, substantially paid down bank debt and carried on with its
reduced, but well established and very profitable, business.
Instead, over the past 15 months, McGrathNicol and RBNZ have been arguing that the strengthened CBLI French construction
liability reserves for expected future claims over the next 10 to 12 years were still substantially under-reserved, with
both relentlessly focussed on putting CBLI into liquidation, as if to simply prove themselves right. As part of this
process, Mr Harris said, they offered inducements for the two major creditors Elite and Alpha to successfully support
liquidation efforts.
This was despite the largest creditor, Elite Insurance, after considering all the expert actuarial reports, agreeing to
take on CBLI’s European liabilities at the value recommended by PWC and adopted by CBLI in its balance sheet. “This was
a critical example of the market speaking to the numbers,” said Mr Harris. “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.”
Mr Harris said that the 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. “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?” Mr Harris said.
“Is it because they don’t want to admit that the CBLI values were right after all? They knew Elite would accept the CBLI
liability numbers recommended by PwC, so why did they use the higher liability values to try and justify liquidation in
November?
“And why oppose the DOCA proposal in November that would have benefitted all creditors and policyholders of CBLI, with
benefits flowing through to the parent CBLC and its creditors? This would have paid money to the banks and formed the
basis of a viable DOCA for CBLC – potentially avoiding liquidation at this week’s hearing.”
Ends