McKenna tries to win last-minute bankruptcy deal

Nigel McKenna. Photo / Chris Melville

Auckland developer Nigel McKenna, facing bankruptcy over an $880,000 debt, has put forward a $1.25 million creditors proposal although he could owe as much as $260 million, the High Court heard yesterday.

McKenna wants to keep his finances away from the Official Assignee's reach but the Fletcher Construction Company wants to bankrupt him for not repaying $880,000, the relatively small amount left outstanding after it built the Holiday Inn, the $100 million Wellington hotel now called Rydges.

Fletcher has been claiming that money since 2009 and after a callover late last year, the matter went forward yesterday for what was expected to be a defended bankruptcy hearing.

McKenna was fighting Fletcher's bankruptcy application on the grounds it was not fair or equitable.

But in a last-minute turnaround, a new deal emerged. The court heard how McKenna put forward a creditors proposal to repay about $1.25 million over three years.

Under that deal, those claiming money would meet on April 8 to vote on the scheme but certain thresholds must be met for that to succeed.

At the back of Court 3 sat one of New Zealand's most experienced insolvency practitioners, Jeff Meltzer of Meltzer Mason Heath, engaged to handle that debt repayment proposal, which will be on a three-year term.

Graeme Christie, the Simpson Grierson partner representing Fletcher, claimed that if McKenna's $110 million debt to Allied Farmers was added to his $150 million debts, the total amount owed by the developer was closer to $260 million.

That $110 million was not included in the creditors proposal, Christie claimed, but amounts loaned had ballooned with various penalty interest and non-repayment clauses driving up the sum, originally loaned by Hanover Finance but later assigned to Allied under the deal backed by Hanover investors.

McKenna has not admitted the $110 million figure but via his Queen's Counsel, Brian Keene, yesterday did agree he owed Allied $21.2 million.

Justice Tony Christiansen was less concerned with the size of the numbers throughout staggered proceedings during the day and more with the process of the disputed case, heard under the Insolvency Act.

McKenna is the country's busiest private developer, having over more than a decade built award-winning apartment complex the Beaumont Quarter, residential project Lighter Quay with its Westin Hotel, the $1 billion Kawarau Falls multi-hotel property near Queenstown, Wellington's Rydges Hotel and many other projects.

The judge heard complaints, mainly from Christie, over the last-minute nature of the new deal and even Keene said he was seeking the court's indulgence so the scheme might be considered. Christie complained he got news of the new deal only on Sunday night.

Keene described the late change as "most unfortunate".

If McKenna is bankrupted the Official Assignee could take complete control of all his complicated financial affairs, a move which should happen sooner rather than later, Christie argued, to preserve what value remained.

But Keene argued that the court must allow him time and he referred to some of the sums cited as "over the top". Allied had wanted to look at McKenna's proposal, so it was appropriate the court take more time, Keene urged.

And it was the case that creditors needed to vote on the proposal so it was wrong to proceed with the bankruptcy hearing until those claiming money from McKenna and his companies were allowed to consider proposals.

Judge Christiansen said he had a particularly full schedule but would allow about 10 minutes for the matter to be called today around 10am.

This story has been changed from an earlier version which said Nigel McKenna cited a $150 million creditors proposal. In fact, his proposal is to repay only $1.25 million on debts estimated in court to be $150 million.