Henry bankrupt debts of $55M

Press, 31 August 1989, Page 37

Henry bankrupt debts of $55M

Special correspondent

Auckland

Energycorp’s founder, Gerald Craig Henry, was adjudicated bankrupt yesterday on a credit-card debt of $50,000. His total debts amount to $55.7 million. Master Towle made the bankruptcy order in the High Court at Auckland after rejecting submissions in support of a scheme of arrangement with creditors under part XV of the Insolvency Act.

Mr Henry, who has made 15 fleeting visits to New Zealand is an export salesman for an American company since the collapse of Energycorp 18 months ago, sat quietly at the back of the court with his former partner, Mr Steve Trott, and lawyer, Mr Michael Whale. His only comments during the hearing were an expletive when the Diners Club credit manager, Mr .Robert Lees, said part of his bill related to purchase of clothes, and a comment, “It’s ridiculous,” when the Diners Club lawyer, Mr George Bogiatto, called for some precautions so Mr Henry could not leave New Zealand after the bankruptcy order.

The Diners Club petition was based on a November, 1988, judgement for $50,894.41. The credit-card company was supported by the Bank of New Zealand, owed just under $610,000 on a judgment debt, but a total exceeding $9 million under various claims.

Mr Henry’s counsel, Mr Alan Sorrell, said the scheme of arrangement was executed and filed just before yesterday afternoon’s court hearing. “The proposal envisaged a total payment of $635,000 of which $569,000 is money creditors would not get in a bankruptcy,” Mr Sorrell said.

The scheme was to have been put to all creditors within three weeks, Mr Sorrell said in seeking an adjournment of yesterday’s hearing. Master Towle said his impression was that Mr Henry assessed his present assets at $129,000, that he was borrowing $lOO,OOO from his employer now, and boosting the loans to $500,000 later so that he could pay out $635,000 over three

years. Mr Sorrell said the proposal essentially was for creditors to get three cents in the dollar. However, Master Towle found only one cent in the dollar as an ultimate total, with 0.2 cents offered immediately, and those figures depended on further borrowings. The Master questioned the number of international flights Mr Henry seemed to have had money for and also noted that $37 million of his debts arose from unpaid share purchases, which he could only describe as reckless. Mr Sorrell said his client’s circumstances after the October, 1987, sharemarket crash were “difficult.” “He considered he had no prospect of paying his creditors. Since then he has worked hard and been very successful as an export salesperson. “The substantial premium that will be payable to creditors is almost entirely accountable to the success he has enjoyed in that field.” Mr Sorrell said Mr Henry had already paid $3 million to creditors. “If it was his wish to thumb his nose at all and sundry, it’s difficult to know why he would have gone to the trouble in preparing this scheme,” Mr Sorrell said. Mr Bogiatto, concerned that Mr Henry should continue to live overseas while leaving his creditors languishing in New Zealand, said the assets creditors were offered came “mostly in the form of shares and some interest in Heat Harness estimated at $47,000, and an interest in a partnership. “The only way in which the debtor can hope to make any payment to his creditors is by

borrowings, and future borrowings.” Diners would get only $1669 for its $50,000 and the three cents in the dollar creditors generally were to get was a gross figure, Mr Bogiatto said. Costs of administering the scheme, plus legal fees, would be taken out first. Mr Sorrell said creditors owed $24 million had agreed to the proposal. They included a Mr McGee, who was to get $20,000 for his $lO million; a Mr G. M. Bates, owed $l3 million; and a Hamilton Bell, owed $487,000. Master Towle said the level of indebtedness was "almost astronomical by New Zealand standards. It is certainly the highest that has come before this Court in the last few years.” The Master said he could see no possibility, even after full consideration of the scheme, that the full body of creditors would approve it. Outside the court, Mr Henry would make no comment and Mr Sorrell said an appeal was “a matter we have to consider.” Mr Henry’s debt-compromise proposal was modelled on two similar ones sanctioned by the Court in April, those of Mr Trott and Mr Ray Joy.

Energycorp Investments, Mr Henry’s main company, started out with $7 capital, increased to $lOO,OOO in December, 1986. It reported a $3.4 million profit in the year to September, 1987, though it had no cash flow, and creditors were told the shortfall would exceed $2O million. The BNZ lent Energycorp $15.5 million, installed a receiver in February, 1988, and had the company wound up soon after.