Home' Trinidad and Tobago Guardian : November 19th 2015 Contents NOVEMBER 19 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
Chief editor-business: ANTHONY WILSON
Editing and design: NATASHA SAIDWAN
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The Government needs to seriously rethink
the draft shareholders agreement between
the State and the CL Financial shareholders
if only because the economic circumstances
that T&T finds itself in now are vastly dif-
ferent to the economic circumstances when
the main points of the draft agreement were
To be very clear, as the Minister of Finance Colm Imbert noted
in his budget presentation, T&T faces a 2016 budget deficit that
could be as high as $21.4 billion (or 13 per cent of estimated GDP)
if the Government does not get the VAT revenues it expects and
if the State does not get the projected one-off revenue flows
from the sale of assets and dividends from state-owned enter-
If there is even a hint that the fiscal deficit for 2016 will be
more than the $2.8 billion or 1.7 per cent of GDP that Mr Imbert
estimated he would achieve, quite predictably the rating agencies
would move to downgrade T&T immediately.
This would result in even local financial institutions thinking
twice before financing the Government s budget deficit by pur-
chasing bonds issued by the State or state-owned institutions.
T&T also faces a foreign exchange problem---some people are
even referring to it as a crisis---as the amount of US dollars the
country expects to earn from energy revenues in the 2016 fiscal
year will be substantially less than in 2015.
Taken together, T&T s extremely serious fiscal and foreign
exchange challenges constitute the context that must inform
how Cabinet, led by Prime Minister Keith Christopher Rowley,
treats with every money matter that comes before it, but especially
the resolution of the CL Financial bailout.
The point I am making here is that while the former minister
of finance, Larry Howai, may have presided over various iterations
of the draft shareholders agreement during a time of plenty---
for most of his tenure, at least---the current minister simply does
not have that luxury.
The financial context that Mr Imbert faces in November 2015
is very different to the financial context that Mr Howai faced in
This means that while there were elements that Mr Howai
may have been prepared to accommodate in the draft shareholders
agreement in November 2014, it would be a gross financial and
constitutional dereliction of his duties and responsibilities for
Mr Imbert to even consider in November 2015.
The prime example of how the financial context ought to
change the outcome of the shareholders agreement is the fact
that the Ministry of Finance, under Mr Howai, was prepared to
accommodate the transfer of Clico s shares in Angostura, CL
World Brands and Home Construction Ltd (HCL) from the Gov-
ernment to CL Financial.
To explain this, Clico is due to transfer its 32 per cent stake
in Angostura, its 42 per cent stake in CL World Brands and its
43 per cent stake in HCL to the Government for $3 billion, as
part payment of $7 billion debt.
This transfer of assets by Clico to the Government---after the
assets have been independently valued---has been reported on
by the Central Bank in statements on March 27 and November
What has not been properly ventilated is the fact that the draft
shareholders agreement proposes that the Government would
then transfer those assets worth $3 billion to the shareholders
of CL Financial, who include Lawrence Duprey, for them to
manage with a debenture over the fixed and floating assets and
This would mean that Clico s 32 per cent stake in Angostura
would be transferred (and maybe gifted is a more appropriate
word) by the Government to CL Financial, returning the failed
conglomerate to control of the rum and bitters producer.
It would also mean that Clico s 43 per cent stake in HCL would
be transferred, or gifted, by the Government to CL Financial,
placing shareholders of the failed conglomerate at the helm of
T&T s largest private sector landowner.
And it would mean the transfer of Clico s 42 per cent in CL
World Brands by the Government to CL Financial, which in effect
allows the transfer of a majority stake in Angostura to pass from
Clico, to the Government to CL Financial.
You read that right:
• Yes, Clico currently has a majority stake in Angostura, through
its 42 per cent shareholding in CL World Brands;
• Yes, it is proposed that Clico transfer that majority shareholding
in Angostura to the Government and;
• Yes, Government in the draft shareholders agreement between
CL Financial and the State proposes to transfer that majority
shareholding in Angostura back to the CL Financial sharehold-
How does Clico control a majority stake in Angostura?
Angostura has 206,277,630 shares in issue;
According to Angostura s 2014 annual report, the company s
two major shareholders are Rumpro Ltd with 92,551,212 shares
(44.8 per cent) and Clico with 66,971,877 shares (32.46 per cent).
According to page 20 of the 2013 CL World Brands financial
report, that company "owns the entire share capital of Rumpro
Company Ltd, a company registered in St Lucia, whose only
interest is 44.97 per cent of the share capital of Angostura Holdings
Ltd, a company registered in T&T and listed on the T&T Stock
Clico owns 42 per cent of CL World Brands (see Clico s
2013 annual report), so Clico is entitled to 38,871,509 shares in
Angostura (42 per cent of 92,551,212) from CL World Brands.
But Clico owns 66,971,877 Angostura shares in its own
Add 38,871,509 shares to 66,971,877 shares, and you get
This means that Clico has control over 51.31 per cent of
Angostura, which is 105,843,509 shares divided by 206,277,630
Please follow this logic carefully:
• Clico is, in effect, the majority shareholder of Angostura;
• It is proposed that Clico s shares in Angostura and CL World
Brands should be transferred to the Government, which would
entitle the Government to the control premium over Angostu-
ra;• It is proposed, in the draft shareholders agreement, that the
Government transfer the control premium over Angostura back
to the CL Financial shareholders.
Why would the Government hand over 51.31 per cent control
of Angostura to CL Financial, when Government can hire its own
investment banker and get the best price for what is T&T s only
world-famous brand, in a fully transparent and internationally
credible bidding contest?
From my calculations, the shareholders of CL Financial are
entitled to 53,679,703 Angostura shares---which is 58 per cent of
the 92,551,212 Angostura shares owned by CL World Brands---
which means that those shareholders are legally entitled to 26
per cent of Angostura. That is 53.67 million shares divided by
206.27 million shares.
At today s share price of $14 a share, those CL Financial share-
holders would be entitled to share $751,515,842. Is that not enough
for shareholders of a company that was bankrupt---meaning that
the company could not pay its debts when they became due---
and a company that received a bailout of up to $20 billion in
Why should the State transfer assets worth $3 billion to the
shareholders of CL Financial, when those shareholders are entitled,
by right, to at least $751 million?
And what is to prevent the shareholders of CL Financial from
lining up a buyer for Angostura and selling the 77 per cent stake
that they would have in the rum and bitters producer for more
than what the shares currently trade for on the local market
Given the financial context outlined above, one is forced to
wonder what Prime Minister Keith Rowley thinks about his
administration agreeing to hand over assets worth $3 billion to
the shareholders of CL Financial---assets that may be worth much
more when tested on the international market?
Is it legal for the Government to hand over assets worth $3
billion to any private sector company---and to a company that
has a dismal track record of mismanagement---in circumstances
that are shrouded in secrecy and lack of transparency?
Would Mr Imbert be fulfilling his fiduciary duty to the taxpayers
of T&T if he allows the transfer of $3 billion in assets to pro-
Disclosure: The author of this commentary is a shareholder of
Angostura Holdings Ltd
What does PM Rowley think of
$3 bn transfer to CL Financial?
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