Home' Trinidad and Tobago Guardian : April 2nd 2015 Contents APRIL 2015 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
Chief editor-business: ANTHONY WILSON
Editing and design: NATASHA SAIDWAN
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On Friday last, the Governor of T&T s
Central Bank and the country s Minister
of Finance made statements on the
resolution of the CL Financial/Clico
nightmare, which was caused by the
collapse of the conglomerate and its
insurance company subsidiary in Jan-
uary 2009, more than six years ago.
As someone who has written more extensively on this issue
than anyone else, the outline of the rescue plan by the local
authorities is a source of some satisfaction, as it represents
one of the last steps in ensuring that all of those who invested
their savings in Clico and British American will be fully repaid...
The 18,000 policyholders and investors in the short-term
investments of Clico and British American owe a debt of grat-
itude for their stewardship over the resolution process thus
far to Governor Rambarran, Minister Howai and all of the
technocrats and advisers who played a role in getting the issue
to this point. It is obvious that the 18,000 would be hoping
that nothing in the future derails their expectations of being
It needs to be made clear though, that as far as T&T holders
of Clico s Executive Flexible Premium Annuities (EFPA) are
concerned, the debt of gratitude is for the stewardship of the
process and not for the monies they will receive as those pol-
icyholders are covered by the insurer s statutory fund. Once
the statutory fund is in surplus, those investors are guaranteed
to receive their funds.
Of course, there are other classes of individuals and insti-
tutions whose investments were not covered by Clico s statutory
fund who would have cause to be grateful for both the process
and the monies. This would include: EFPA policyholders who
are not resident in T&T, those who invested in Clico s mutual
funds and other investments as well as the British American
policyholders (whose statutory fund is going to receive nearly
$800 million in state funds).
While there is satisfaction and gratitude at the prospect of
a final resolution, some questions remain:
1) Need for fuller disclosure
In his statement last Friday, Governor Rambarran said:
"Clico is now in a position to make payments to its creditors
in order to advance the resolution of the company. Clico s
ability to meet its obligations to creditors and policyholders
is based on its most recent management accounts as at Decem-
ber 2014 and our up-to-date understanding of Clico s statutory
fund position. These numbers indicate Clico now has sufficient
assets to pay its liabilities in its statutory fund. The improvement
in Clico s statutory fund position resulted mainly from the
sale of Clico s shareholding in Methanol Holdings Trinidad
Limited (MHTL) in October."
This statement raises several issues:
a) Would there be any issue if the Central Bank were to
publish details of Clico s statutory fund and its management
accounts as at December 2014?
The publication of those details would indicate to the public
the extent to which the assets in Clico s statutory fund exceed
its liabilities and the composition of the statutory fund: the
itemisation and value of the shares of the listed and unlisted
companies in the statutory fund; the itemisation and the value
of the bonds in the statutory fund and the amount of cash in
it, especially as the sale of MHTL in October caused the release
of just over $7 billion in cash to Clico s statutory fund.
b) This point is particularly valid as the cash infusion into
the statutory fund from the sale of MHTL would have happened
in October, which would have been when the Central Bank
would have known that the statutory fund was in surplus and
the policyholders could have been fully repaid.
As far as one can deduce, the reconciliation of the statutory
fund after the receipt of the MHTL proceeds would have
involved adding the cash from the sale of the shares to the
statutory fund deficit outlined in Clico s 2013 financial report.
In other words, the Central Bank and the Ministry of Finance
should have known the state of Clico s statutory fund since
Did it really take the Central Bank, the Ministry of Finance
and Ernst&Young nearly six months to validate that the monies
in the statutory fund could meet the commitments to repay
made by the Central Bank and the Ministry of Finance, as
Finance Minister Larry Howai suggested at a press conference
last Friday? Or is it that the resolution plan---which would have
involved deciding who gets what and when---took six months?
2) Taxpayers vs CL Financial shareholders?
Governor Rambarran said the Government---which represents
taxpayers in this Clico issue---received a payment of $4 billion
in cash on Friday "and potentially around $3 billion in lieu of
cash through the transfer of Clico s shareholdings in Angostura
Holdings Limited, CL World Brands Limited and Home Con-
The Governor also said that the $7 billion represented 85
per cent of the Government s claim on Clico s statutory fund,
which suggests that that claim was $8.235 billion.
Now, Clico owns 32 per cent of Angostura Holdings Ltd,
(66,971,877 shares), 42 per cent of CL World Brands and 43
per cent of Home Construction Ltd. In Clico s 2013 financial
statement, its stake in these three companies was valued at
$1.963 billion (Angostura = $835.139 million; CL World Brands
= $747.427 million and Home Construction = $380.975 million).
On Tuesday, Clico s stake in Angostura, which is publicly listed
on T&T s stock exchange, was worth $937.6 million, based on
the market price of $14 per share.
Can the Central Bank explain how assets that were valued
at $1.963 billion at the end of $2013, escalated in value by more
than 50 per cent by the end of 2014?
As far as I am aware, most of the value of CL World Brands
is in cash as a result of the sale of Burn Stewart, Hine and
other companies as well as its 45 per cent stake in Angostura,
which is held through a company called Rumpro Company
Ltd, which is a St Lucia-based subsidiary of CL Financial.
It seems to me that if the Clico-stake-to-be-transferred-
to-Government in Angostura, CL World Brands and Home
Construction Ltd is worth $3 billion, "subject to an independent
valuation pursuant to section 44D of the Central Bank Act,"
then the value of CL Financial shares in these companies---
which is 45 per cent of Angostura, 58 per cent of CL World
Will CLF shareholders
get a $4 billion windfall?
Central Bank Governor Jwala Rambarran
Minister of Finance Larry Howai
Continued on Page 5
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