Callaghan Innovation loans: a 42 percent default rate and a firmer Crown creditor

One of New Zealand's largest experiments in direct Crown lending to private business is producing a sobering set of numbers. Figures reported by the New Zealand Herald this month show that 42 percent of the former Callaghan Innovation loan book is in default, 69 borrowers are already in receivership or liquidation, and the Ministry of Business, Innovation and Employment (MBIE), which inherited the book when Callaghan was wound up, is taking a noticeably firmer approach to collecting what is owed. For the hundreds of companies still carrying one of these loans, and for everyone else who extends them credit, the change in posture matters.

A COVID-era scheme, and what became of it

The loans date back to mid-2020, when the Government directed Callaghan Innovation to run a short-term loan scheme for R&D-performing businesses, so that research programmes disrupted by COVID-19 could keep running. In all, 456 loans were approved, totalling just over $149 million.

Callaghan Innovation was disestablished in 2025 as part of the reshaping of the Crown's science and innovation agencies, and its loan book transferred to MBIE in November 2025. What began as emergency support is now, in practical terms, a Crown debt book managed by a ministry. MBIE has told the Herald it is putting in place a more robust debt management framework, with clearer accountability for monitoring and escalation, more systematic impairment provisioning, and a sharper focus on recovering funds.

What the numbers show

MBIE's breakdown of the book, as reported by the Herald, is set out below. Only 54 of the 456 loans have been fully repaid, and a further 154 are being repaid on schedule. The rest tell a harder story: 147 loans worth $48.8 million are in default or arrears with no payment arrangement in place, another 31 borrowers are in arrears and paying less than the full amount under an arrangement, and 69 borrowers, owing $23.2 million between them, have already gone into receivership or liquidation.

Source: MBIE loan book figures as reported by the New Zealand Herald, 17 July 2026.

Two things stand out. First, roughly one borrower in seven has already reached a formal insolvency process. Second, with $116.8 million still outstanding and 147 defaulted loans not yet subject to any arrangement or formal process, the receivership and liquidation numbers have room to grow. The Herald's reporting draws the same conclusion: the losses are likely to get worse before the book is finally wound down.

A Crown creditor with a firmer mandate

For most of the scheme's life, borrowers dealt with an innovation agency whose instinct was to support companies through difficulty. That has changed. Enforcement is no longer theoretical: the Crown has pursued eight recovery cases with more in preparation, and defaulting borrowers have been wound up in the High Court on the application of the Attorney-General. The Herald's reporting also records a live policy debate, with an experienced early-stage investor questioning whether the Government should be picking winners with taxpayer loans at all.

Whatever view one takes on that debate, the practical reality for borrowers is simpler: the counterparty on the other side of these loans now behaves much more like a commercial creditor. It mirrors what we have seen from Inland Revenue over the past two years. The post-COVID period of forbearance is over, and Crown creditors generally are moving earlier and more decisively. Our guide on falling behind with Inland Revenue covers the same dynamic from the tax side.

If your company still owes a Callaghan loan

A few practical points follow directly from the numbers above:

• Treat the loan as core debt, not soft money. It is a Crown debt that MBIE is actively monitoring, provisioning against and, where necessary, enforcing.
• Do not let arrears drift. The widest range of options exists before a missed payment hardens into a default with no arrangement in place. 31 borrowers are already repaying under negotiated arrangements; a realistic proposal made early is far more likely to be accepted than silence.
• Know what a statutory demand means. Formal recovery usually follows a well-worn path, and our plain-English guide to statutory demands explains the timeframes and consequences.
• If the company is insolvent or close to it, take advice on your duties. Continuing to trade while insolvent can create personal exposure for directors under sections 135 and 136 of the Companies Act 1993. Our for directors page sets out the ground rules.

Where the pressure extends beyond the Callaghan loan, the formal tools, a creditors compromise, voluntary administration, or in some cases an orderly liquidation, can protect more value than waiting for enforcement to arrive. The earlier the conversation, the more of those options remain open, something we cover in more depth on our business recovery and turnaround page.

For creditors and advisers

If you are owed money by a company that also carries a Callaghan loan, the Crown's firmer stance affects you too. A liquidation application by one creditor brings matters to a head for all of them, on a timetable you do not control. Suppliers and financiers dealing with R&D-heavy businesses should factor the status of any Crown loan into their credit decisions, and accountants and lawyers with clients in the scheme should be asking about the loan's position now, not after a demand arrives. Our for creditors and for advisers pages explain how we help, including where a client needs an independent view on whether a business remains viable.

The lesson in the numbers

Lending to early-stage, R&D-intensive businesses was always going to carry a high loss rate; that is the nature of the risk the scheme deliberately took on in 2020. The policy debate about whether the Crown should make loans of this kind will run its course. For directors and creditors, the practical lesson is more familiar: face financial difficulty early, while options remain open. A confidential conversation with a licensed insolvency practitioner costs nothing to arrange, and it is far easier to have before a Crown creditor forces the issue. Get in touch to talk it through.

This article is general commentary only and does not constitute legal, taxation or insolvency advice. Specific advice should be obtained from a qualified adviser in respect of your particular circumstances.

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