Court orders Hegri Investments to repay ISK 53.2 million

Reykjanes District Court has ordered Hegri Investments ehf. to repay more than ISK 53.2 million, plus interest, to the bankruptcy estate of car-rental company Bílaleiga Reykjavíkur ehf. The company must also pay ISK 900,000 in legal costs, mbl.is reports.

The ruling, issued on Monday, voided payments from the car-rental company to the investment firm. The court found that the payments had substantially weakened the rental company’s ability to pay its debts and benefited one creditor at the expense of others.

The payments related to a ISK 50 million loan Hegri Investments made to Bílaleiga Reykjavíkur in February 2023. Jóhannes Sigurðsson was a board member, managing director and authorised signatory of the rental company, as well as chair of the board and sole owner of Hegri Investments. The court therefore considered the companies related under bankruptcy law.

The loan carried a fixed annual interest rate of 25 percent and was due to be repaid in full in one payment on 31 July 2023. The agreement allowed early repayment without a charge. Instead, payments were made in multiple transfers between March 2023 and March 2024, both before and after the due date.

The bankruptcy estate sought to have payments totalling ISK 53,242,614 voided and recovered. Hegri Investments argued that the loan was secured by mortgages on the rental company’s properties and that the payments had caused no loss to the estate.

The court noted that the Court of Appeal had already rejected Hegri Investments’ claim to have its debt recognised as a secured claim in the bankruptcy proceedings. The district court therefore proceeded on the basis that the loan was unsecured.

Court found payments improper

The court said Bílaleiga Reykjavíkur was in poor financial condition when the payments were made. It owed substantial sums to numerous creditors and was not meeting its obligations to them.

The payments were made in an irregular manner and significantly reduced the company’s ability to pay. The court said it was not reasonable to use the agreement’s early-repayment provision in those circumstances. Payments to a related party had also undermined equal treatment of creditors.

The court found the payments improper, saying they benefited Hegri Investments at the expense of other creditors. The investment firm should have known that the rental company was insolvent or that the payments would make it insolvent. The court also said Sigurðsson had been “on both sides of the table” and could not argue that he had not been involved in the rental company’s day-to-day operations.

Hegri Investments also argued that payments it had made to the rental company should be taken into account, noting that some transfers had been made in matching amounts in both directions. The court rejected the argument that these payments reduced the repayment claim.

Bílaleiga Reykjavíkur was placed into bankruptcy proceedings on 23 May 2024 at the request of its board. Claims filed against the estate totalled about ISK 1.63 billion. The company had around 500 rental cars and about 35 employees shortly before its collapse.