13 Nov 2018

CBL Insurance in liquidation, Reserve Bank hires investigators

12:42 pm on 13 November 2018

The High Court in Auckland has placed CBL Insurance in liquidation, at the Reserve Bank's request.

The Reserve Bank of New Zealand

The Reserve Bank of New Zealand Photo: RNZ / Alexander Robertson

The decision was expected after the directors of CBL Corporation withdrew their opposition to the Reserve Bank's application to liquidate its flagship insurance business, prior to the hearing on Monday morning.

The interim liquidators, Kare Johnstone and Andrew Greenfell of McGrathNicoll, were appointed as the liquidators on Monday afternoon.

CBL Corp. directors Peter Harris and Alistair Hutchison, withdrew their opposition after their major creditors in Europe, Elite Insurance and Alpha Insurance, pulled their support for a restructuring plan.

However, the directors still hoped to revive the business in order to create some value for shareholders. They intend to present a plan next week, with a shareholders meeting to be held in the future.

CBL's troubles began last year after admitting it was in breach of its solvency levels and then defied an RBNZ instruction early this year not to pay $55 million to two overseas companies.

The central bank took action against CBL in February to prevent it from making any more payments to overseas banks and creditors, wanting to get their hands on an estimated $750m of assets.

In a written statement, the bank's deputy governor Geoff Bascand said he welcomed the liquidation, after delays caused the court hearing to be pushed back five months.

"Opposition from CBL Insurance's directors and from the shareholder caused significant delay to the full liquidation hearing," Mr Bascand said.

"Once major creditors of CBL Insurance failed to come forward with support for an alternative restructuring proposal, then the liquidation outcome became inevitable. We are pleased a contested trial was unnecessary."

The bank has launched an independent review of its own dealings with CBL, including its decision to licence CBL in 2013.

The investigation was being led by QC's John Trowbridge and Mary Scholtens, with a report expected next year.

CBL Insurance continues to be investigated by the Financial Markets Authority and the Serious Fraud Office.

The voluntary administration of CBL Corporation, by KordaMentha, was still ongoing.

The co-administrator Neale Jackson said a restructuring of CBL Insurance would have had a better outcome than a liquidation, however it would not affect the separate administration of the parent company, which included selling off other companies in the group.

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