Watson companies owe $200m
Eric Watson’s collapsed business Cullen Group owes its biggest creditors, Inland Revenue and Sir Owen Glenn’s Kea Investments, about $100 million each, its liquidator says.
Eleven companies linked to Watson have been placed into liquidation since the High Court ordered parent company Cullen Group’s liquidation last week.
Liquidator Vivian Fatupaito said KPMG had been appointed by shareholders to liquidate the linked companies.
At least six more companies owned by Cullen Group would be placed into liquidation before Christmas, she said.
Cullen Group had been involved in a long-running court dispute with Inland Revenue, and costs associated with that battle pushed it into liquidation.
In October, Watson lost his appeal to pay former business partner Sir Owen Glenn’s company Kea Investments £43.5 million (NZ$87.8m) compensation from Watson, plus accruing interest of 6.5 per cent.
Nine of the 11 companies have been updated as being placed into liquidation, including Cullen Group, Cullen Inc Holdings, Cullen Investments, Serious Investments, Watson Bloodstock, EGB Holdings, Batty Road Holdings, Serious Holdings and EW Leasing Limited.
Cullen Group is owned by Hong Kong-based company Zedra Asia Limited, which was currently unaffected by the liquidations, Fatupaito said.
Justice Matthew Palmer ruled in March this year that Cullen Group was part of a ‘‘web of entities’’ associated with Watson and designed to reduce its tax.
After moving to Britain in 2002, Watson restructured his business affairs so that shares in Cullen Investments, formerly Blue Star Capital, were replaced by loans worth $291m, owed by Cullen Group to companies in the Cayman Islands, Modena Holdings and Mayfair Equity.
Because Modena and Mayfair were not ‘‘associated persons’’ with the Cullen Group, the arrangements fell into Inland Revenue’s approved issuer levy (AIL) tax regime, which was set up to encourage investment in New Zealand by reducing the cost of New Zealanders borrowing from non-residents.
But the Cullen Group arrangement introduced no new funds to New Zealand.
Using the AIL regime, Cullen Group was able to pay tax at 2 per cent on the $397 million of interest it paid the companies, rather than non-resident withholding tax of 15 per cent.