Home' Trinidad and Tobago Guardian : November 20th 2014 Contents BG4 | COVER STORY
BUSINESS GUARDIAN www.guardian.co.tt NOVEMBER 2014 • WEEK THREE
Finance Minister Larry Howai says the sale
of 56.53 per cent of Methanol Holdings
(Trinidad) Ltd (MHTL) to its minority
shareholder, Consolidated Energy Ltd, for
US$1.175 billion (TT$7.4 billion) allows the
Government to be "a little bit clearer how
things should proceed from here" with
regard to the final resolution of Govern-
ment s bailout of the CL Financial (CLF) empire.
In an interview with the Business Guardian last week, Howai
said the last set of numbers he received from Ernst &Young,
the advisers to the Ministry of Finance on the CLF issue,
indicate that the Government should be able to recover $18.33
billion from the sale of other CLF assets "give or take $100
million or so."
The January 30, 2009 Memorandum of Understanding and
the shareholders agreement between the Government and
CLF, signed in June 2009, stipulate that the State s $20 billion
the group should be repaid by the sale of CLF assets.
In the interview, the minister appeared to suggest that the
Government had agreed that its claim on CLF should be "just
over $18 billion."
In its July 4, 2013, letter of intent, written by its managing
director, Marlon Holder, CLF said while Government had made
a claim against the group for $23.29 billion, CLF "acknowledges
and accepts $18.33 billion of the claim."
Howai explained that the Government had actually disbursed
about $19.7 billion to bailout the CLF empire, but $300 million
of the additional amount may or may not be recoverable as
it went "to stave off the British American Insurance liquidators".
Another $1 billion was disbursed to assist with "payments up
the islands," again for the account of British American, which
is "probably not" recoverable by the Government.
With $7.4 billion recovered from the sale of MHTL, Howai s
approach means that the Government expects the sale of
CLF s other assets to generate around $11 billion.
Of that amount, a significant portion is expected to come
from the sale of Republic Bank shares.
Howai said Republic Bank "is a public institution, the value
of which must be preserved or enhanced, if possible, at all
He said: "We are looking at different options regarding
Republic. I have had some discussions with the bank because
I want to make sure that, in the whole process, they are com-
fortable with whatever is being done and they have a say in
He said the Republic Bank officials suggested that the 40
million Republic Bank shares, equal to 24.87 per cent of the
bank, in the Clico Investment Fund (CIF) should be left alone
and that the balance of the shares owned by CL Financial
should be sold to local institutional investors.
On his discussions with the Republic Bank officials, Howai
said: "They suggested to me that we should leave the CIF
where it is. Then the difference can be absorbed by the local
market: the pension plans, mutual funds, insurance companies
and so on...including Republic Bank s employee stock ownership
plan, Trintrust. That s a possibility that we are looking at.
"I have listened to what they have said. Cabinet has not
made any decision. They have suggested to me that they think
that it could be absorbed locally.
"I also had discussions on the talk about the control premium.
Their view is that right now Republic is trading at a level that
already has the control premium built in, so that you are not
really losing anything.
"So that the issue of a single buyer to get the control premium
is not as much an issue as some people may think it is."
At the current price of $120 a share, the 41 million Republic
Bank shares that the bank s officials suggest can be "absorbed
locally" would be worth about $4.9 billion.
When that sum is added to the $7.4 billion that Clico/Gov-
ernment earned from the sale of MHTL, that brings the sub-
total to $12.4 billion---which is still about $6 billion short of
the $18.4 billion owed to the Government.
Angostura, HCL likely to be sold
Asked how the Government proposed to recover the balance,
Howai said: "There are other assets that have to be brought
into play to ensure that we are fully liquidated. The HCLs
(Home Construction Ltd), Angostura and some other assets
they have," such as CL Marina and Methanol Holdings (Inter-
national) Ltd (MHIL), the Oman-based methanol producer
that is 56.53 per cent owned by Clico.
Clico s stake in MHIL was valued at $693 million in the
insurer s 2012 financial statement, the same accounts that
placed a value of $4.88 billion on MHTL, which was sold for
Howai said that there are some regulatory issues that the
Government has to deal with with regard to the sale of MHIL,
including that the company must be offered first to Consolidated
Energy Ltd, the company that now owns 100 per cent of
MHTL. He said there was a potential purchaser in Oman "who
we would probably want to consider."
Howai added: "There would potentially be value for Clico s
traditional portfolio and they also have some cash on their
balance sheet from the sale of Burn Stewart and other assets."
Burn Stewart, a Scotland-based whiskey producer, was sold
to South African spirits giant Distell in April 2013 for US$244
million. Burn Stewart was jointly owned by CL World Brands,
with 71.1 per cent, and Angostura Holdings, with 28.9 per
cent. That means that CL World Brands would have generated
US$173 million ($1 billion) from the sale of Burn Stewart. CL
World Brands also sold the cognac producer Thomas Hine
and Co to French company EDV SAS for about US$60 million
($372 million) in September 2013.
Clico would also have received cash from dividends generated
by Republic Bank and MHTL.
Asked if the Government proposed to take control of or sell
Angostura, Home Construction and other assets, Howai said:
"There are three options for the Government: one is taking
control of the assets; another is selling the assets and the third
is to take a debenture over the fixed and floating assets that
CL Financial remains with.
"But based on the asset prices that Ernst & Young are seeing,
they think we can actually sell and come out and still have
some residual left for the existing CL Financial shareholders.
So that is the approach we will probably take, subject to
finalising the numbers."
He said some of the assets owned by Clico---such as One
Caribbean Media and WITCO---may be retained by Clico and
sold along with the disposal of the insurance company s tra-
The minister said once everything has been finalised he will
take a proposal to Cabinet and once that has been approved,
he will have another discussion with the bank s official
About the Towers Watson valuation of Clico s traditional
portfolio, Howai said he has asked his staff to conduct an
assessment of the report.
Although he expected the shareholders agreement to be
completed by the end of the year, as scheduled, Howai said
the disposal of assets would take many months to be com-
"I m expecting that things should speed up in the early part
of next year. I don t think you are going to be able to dispose
of Clico s traditional portfolio before that," he said, as the
process involves issuing a Request for Proposals for an invest-
ment bank to arrange the sale, choosing the bank and then
allowing it to do its work.
Disclosure: The author owns Angostura shares
Asked about the 900 or so Clico and British American
policyholders and mutual fund investors, including some
related parties, who have not accepted, or have not
been offered, the Government's offer of zero-coupon
bonds and units in the CIF, Howai said: "For now, we are
not dealing with the related parties. We continue to
maintain that position. We are not dealing with the
related parties at this time.
"Our computations are always based on liabilities
owed to arms-length third parties."
Disclosure: The author owns Angostura shares
State expects to get $18.3 bn
from sale of CL Financial assets
Before October 31, 2012, the CL Financial group held
through its various subsidiaries, 51.4 per cent of
Republic Bank's shares.
Clico, the insurance subsidiary of CL Financial, owned
51.85 million shares (32.19 per cent) and Clico
Investment Bank Limited (CIB) owned 29.38 million
shares (18.24 per cent).
On November 1, 2012, the Government purchased
40.07 million shares from Clico, then worth $4.3 billion,
which were placed into the $5 billion Clico Investment
Fund (CIF). The balance of the funds in the CIF came
from Government bonds.
The creation of the CIF---a vehicle to transfer units to
holders of Clico EFPAs and mutual funds---means that,
at this point, it owns 24.87 per cent of Republic Bank,
while Clico owns 7.32 per cent with 18.24 per cent being
retained by Clico Investment Bank, which was ordered
by a high court judge to be wound up in October 2011
and the Deposit Insurance Company appointed
Minister of Finance Larry Howai
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