Harbour Asset Management has valued CBL Corporation’s shares at only 28 cents each.
The troubled insurer’s shares were valued at $3.17 when they were last traded on February 2, before the NZX implemented a trading halt, followed by a suspension on February 8.
According to Harbour’s estimate, CBL Corporation could now be worth $66 million - around 91% less than the $747 million it was valued at just over a month ago.
Yet Harbour’s managing director, Andrew Bascand, cautions a “very broad range of outcomes” could eventuate.
CBL Corporation went into voluntary administration on February 23, after a Reserve Bank (RBNZ) application to the High Court saw its subsidiary, CBL Insurance, put into interim liquidation. (The RBNZ regulates CBL Insurance, not CBL Corporation).
Towards the end of February, an independent valuation sought by Harbour, priced CBL Corporation’s shares at 88 cents.
Yet the March 1 release of an affidavit by the RBNZ’s Head of Prudential Supervision, detailing how CBL had made payments of $55 million in breach of directions by the regulator, has seen Harbour’s valuation of CBL Corporation shares downgraded to 28 cents.
Harbour funds hold a 7.32% stake in CBL Corporation.
The fund manager become a substantial shareholder in the company on September 29. It then increased its shareholding to 6.23% on November 1, before upping it to 7.32% on January 5.
According to its estimates, the value of its investors’ holdings in CBL Corporation have dropped from around $55 million to $5 million.
Bascand says the situation is disappointing on a number of fronts.
He notes that a lack of disclosure meant that on the face of it, according to publicly available information, the company was a strong performer.
Bascand says he can’t at this stage point the finger at the RBNZ or Financial Markets Authority (FMA) for dealing with CBL confidentially, thus resulting in the market not knowing until February that the insurer was under review and had special solvency restrictions placed on it back in July for example.
“I think there could be a policy problem,” he says.
“We’re waiting for further information and monitoring the situation as closely as we can.”
Lloyd’s to take over contract to underwrite building warranties
In other CBL-related news, the main distributer of building warranties underwritten by CBL Insurance has struck a deal that will see new warranties underwritten by the Lloyd’s of London.
Stamford Insurance will now provide Builtin with cover for its building warranties. Stamford’s products are underwritten by Lloyd’s. Stamford says:
1. For buyers who have signed a contract and paid a deposit where work has yet to start, Stamford will cover the risk that they may lose their deposit if their builder becomes insolvent.
2. If construction has already started, Stamford will guard against builder insolvency and provide 10 years’ defects cover on completion.
3. For homeowners who have taken possession of their homes within the past 12 months and who may have lost their protection against major defects arising with their home, Stamford will offer them a new 10-year policy.
The roughly 10,000 policyholders with warranties underwritten by CBL Insurance, are being advised to register their claims with the insurer, despite claims not being paid while the company is in interim liquidation.
Any queries about these claims should be directed to helpline@cblinsurance.com.
4 Comments
From Australia in the Financial Review:
A leading national property finance company has collapsed potentially leaving an estimated 10,000 residential, commercial and property investors in the lurch about the fate of nearly $300 million worth of deposits.
Deposit Power, which provided interim finance to property buyers, has closed its doors after the collapse of New Zealand’s CBL’s insurance, which was an issuer and guarantor of deposit bonds.
http://www.afr.com/personal-finance/10000-property-buyers-caught-in-dep…
Where does one start to comment on this? I would have got my "sixpennyworth" in sooner, but my account here has only just been approved.
First, I would like to comment on the comments
1)I would not agree totally with GS about " insurance companies" plural, but he/she has a point in this case when reference is made to "there is no will from the government/regulators to do anything for fear of offending them." The following item (1) was sent to the RBNZ on 4 September 2013, NOTE THE YEAR, 2013. (1) Let me ask you a simple question. If the Bank was provided with documentary, irrefutable proof of fraud, albeit committed several years ago, but irrefutable none the less, by a New Zealand domiciled insurance company, the prime mover of which is still running the company, would there not then be an obligation on the part of the Bank to investigate? The same company was issued with cease and desist orders by a number of insurance regulators in a number of places, entered into a deferred prosecution agreement with in one case as a result of paying about US$1,000,000.00 to avoid a criminal prosecution and is currently the subject of a civil case brought by a fraud victim claiming several million dollars. Item
2) Item (2) was the initial reply from RBNZ on 4 September 2013 (2) "The Reserve Bank is now at the end of a 3 year process whereby all insurers undertaking business in New Zealand had to be licensed by us. All licensed insurers will have only recently undergone a rigorous and comprehensive assessment by the Bank of their current prudential condition in order to obtain a licence. If they have acquired a licence then they have satisfied the Bank that they meet the prudential standard. Given the recent comprehensive licensing exercise the Bank would not see itself being under any obligation to investigate an historic event."
3) Item (3) was the final response in that exchange as it was obvious the RBNZ didn't want to know (3)I have nothing to add to the replies sent to you on 4 September and 6 September. In particular the following comment from his email of 4 September succinctly summarises how we view matters of an historic nature. “To carry out its functions under the Act, the Bank is unlikely to consider it ‘reasonably necessary’ to investigate matters that are purely of an historic nature and lack on-going relevance to the current prudential standing of a licenced insurer " I, being simple soul, would have thought that major fraud would have been significant item when considering the suitability of an individual to be head of a licensed insurance company in New Zealand The subject was, as a result of the RBNZ's total dsinterest, left dormant until February 2014,again, NOTE THE YEAR, 2014 when someone higher up the RBNZ food chain was contacted. A huge amount of information was provided, running to about 10 pages and almost 5000 words. Again, the result was total disinterest. The final e mail FROM the RBNZ, on 3 March 2014, stated, among other things "However, I do not believe that we can take this any further at this time." and "In the circumstances I can see little value in continuing correspondence on the matters you have raised." The final e mail TO RBNZ , also on 3 March 2014, said "Thank you for this. I agree that further correspondence is futile and you will not hear from me again. I am glad that you are on record as refusing to do anything."
Let us now move on to September 2015, note the MONTH, SEPTEMBER. CBL just happened to go public in OCTOBER 2015.
On 17th. September 2015 the following was sent to the FMA "When a company submits a prospectus to have its shares quoted on the New Zealand and Australian stock exchanges, is it permitted to put something in its prospectus that is a blatant lie for which there is irrefutable, documentary evidence to prove that the statement is a lie? Is it also permitted to exclude information which, if the truth instead of the lie had been told, would have had a serious affect on the supposed integrity of at least one very high member of te sthaff, at board level? Is it also permitedd to be what could be described as "economical with the truth" concerning another item mentioned in the prospectus?"
On the 18th. September 2015, the following reply was received from the FMA "Thank you for submitting your question below. As you may well be aware, false or misleading information is not allowed in a prospectus (or new product disclosure statement). This prohibition also covers information which is misleading by reason of omission of a material matter.
If you believe that a particular prospectus contains false or misleading information we would be very grateful if you could let us have details so that we can look into the matter."
On 21st September, the following reply "Thank you for prompt reply.I have done quite a comprehensive reply alhtough, as I say in it, it is merely the tip of a very large iceberg . You will, therefore, see 3 attachments. I will be interested to see what you have to say and what, if any, action you take. was sent to the FMA along with, as stated" was went to the FMA. The attachments proved that CBL had told lies in their Product Disclosure Statement, but the FMA were not interested and did nothing.
There is more, so watch this space!
OH, just quickly. I wonder if "Alice" knows that a director of " Deposit Power A leading national property finance company has collapsed potentially leaving an estimated 10,000 residential, commercial and property investors in the lurch about the fate of nearly $300 million worth of deposits." is a certain Mr. Mulholland, who just HAPPENS to be the COO of CBL and is in the process of serving out his resignation period. Interesting eh?
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