Home' Trinidad and Tobago Guardian : August 1st 2013 Contents BG4 | COVER STORY
BUSINESS GUARDIAN www.guardian.co.tt AUGUST 2013 • WEEK ONE
This has not and has never been a liqui-
dation. This has always been a restructuring and
recapitalization exercise in Clico and BAT and a
mitigation exercise with CLF. Why mitigation
with CLF? Government has not given any funding
to CLF - only to Clico, BAT and CIB - and has
placed the Board (with the consent of CLF share-
holders) in a position to manage the assets outside
of Clico & BAT (as well as inside) so that it is
possible to preserve and then improve value in
First, CLF does not control $33 billion in
assets. The majority of the assets are under the
control of the Central Bank with respect to Clico.
It is not in CLF's absolute power to distribute
the assets in the manner being suggested. This
will be counter the terms of the January 30, 2009
Memorandum of Understanding. Under the MOU,
Government injected funds into separate com-
panies. Government then stipulated that the
funds so injected would be recovered from the
assets of the respective companies with any
shortfall being claimed from CLF.
Secondly, in a restructuring, there are no statu-
tory rules such as those that apply in a liquidation.
It is all about financial management and anything
that is likely to produce the value that is being
preserved is, within the confines of legality. So
Government (and CLF) has approached the matter
• Preserve value as far as possible. In doing
so, Government has restructured the internal
debt of individual companies such as AHL and
HCL, to repay such debt on commercially viable
terms and in a manner that, for example, allowed
AHL to be relisted and for dividends to be paid.
• Sell assets. In due course, in a manner that
ensures the preservation of their value and derives
such premiums as would normally be available.
This has been done for companies such as Burn
Stewart, and even COLFIRE although this has
not yet been completed.
• Manage debt. Use the proceeds of these
asset sales to pay down debt (the mall sales have
done this in HCL's case) and provide any surpluses
ultimately to repay debt elsewhere---including,
as is likely, in BAT and CIB.
The secured creditors are secured on specific
assets and are only entitled to the proceeds of
any sale of the specific assets. Any shortfall drops
will become unsecured. This position would not
have been available in a liquidation. Moreover,
GORTT also has effective management control
through which to further protect its position.
In a period of economic uncertainty and lack
of growth, Government has protected the jobs
not only of persons directly employed in the CLF
Group, but also in ancillary groups that would
most likely have been affected by the absolute
failure and liquidation of CLF.
The $1.6 billion in value is AFTER internal
company debt has been taken into account and
the overall position will be known and assessed
when the divestment process is completed.
A: Government cannot deny CLF a right to
make a claim. At this point Government does
not accept the claim but has agreed to accept
a mediator's decision in regard to it. Government
has not expropriated any value that is due to
CLF. What it has done is to make such value
available to the creditors of the financial entities
and for the repayment of the restructuring and
A: Government continues to hold the view
that the Declarations of Trusts exist and are valid.
A: GORTT is in fact in part, exchanging its
position in CLICO / CIB for cash and a secured
position over all other CLF assets for any residual
that may exist after the divestment strategy has
There is no intention to transfer assets out
of the Statutory Fund unless it is properly replaced
by assets acceptable to the Central Bank of
Trinidad and Tobago.
ii. Potentially triggering the Takeover Code
CLF will not be increasing its shareholding
in Angostura. It is anticipated that CLICO's and
CIB's holding in Angostura will be reduced.
iii. Giving over control of a public Company.
Government currently sits on the Board of
Angostura. Government will continue to be rep-
resented on the boards of CLF, AHL etc and
supported by a new shareholders agreement with
restrictive covenants and provisions.
These issues do not arise because the plan
envisages no further acquisitions of HCL or AHL
by CLF. The plan is based on the premise that
the sale of assets in CLICO, BAT, CIB and CLF
would be utilized to repay the third party creditors
(including Government) of CLICO, CIB, BAT and
Should all of these liabilities be satisfied, there
is a possibility that CLF may continue to be a
majority shareholder in some assets. This will
be ultimately dependent on the sale proceeds on
disposition of these assets.
There is no intention to give up control of
CLF. On the contrary, we are seeking to obtain
better control over the Company through the
governance provisions which will be put in place
and the secured debenture.
Under the New Shareholders Agreement,
GORTT will exert control over all major gover-
nance, financial and operational decisions, and
no distributions or benefit could be made to the
shareholders without GORTT's express permis-
Up to press time, the Ministry of Finance left
unanswered the following questions:
For clarity, I repeat that the place of shareholders in an
insolvent company is one of the very well established risks
associated with share ownership, which anyone who has ever
purchased a share in a company ought to know.
The Ministry of Finance says it has no intention of turning
centuries of financial thinking on its head by allowing the
shareholders of CLF to retain and manage assets with values
of $1.6 billion, before the provider of the bailout, the Gov-
ernment, is fully repaid.
The Ministry argues that the shareholders of CLF would
not receive any value from the $1.6 billion in assets, that it
is recommended that the group should retain, until GORTT
is fully repaid.
If by "receiving value" the Ministry means that CLF share-
holders will not be able to enjoy either capital gains or dividend
income from CL Marine, Home Construction or Angostura
before the debenture is fully repaid, the proposal before Cabinet
is certainly one that is eminently supportable.
But if the proposal before Cabinet envisages, or allows, CLF
to retain dividend from Angostura (which is a public company
of which I am a proud shareholder), the Cabinet must reject
the Note in its entirety.
If the proposal gives CLF a free hand to hire consultants,
Parliament must reject the Note. And if the Cabinet Note is
not watertight in sealing off CLF funnelling money from
Angostura, Cl Marine and Home Construction to CLF share-
holders, then the country must reject the Note.
Here is a hypothetical which explains the point I am making:
If the Angostura EPS for 2013 is $1.60, and its directors decide
that a dividend of $0.50 a share is appropriate (thereby dis-
tributing $103 million of total profit of $329.6 million), an
acceptable agreement would be one in which the debenture
ensures that CLF's share of the dividend, which would be
$52.53 million, goes straight to Government?
If the agreement allows CLF to retain the $52.53 million,
or any part thereof, it would unacceptable.
This question is particularly pertinent in light of the sug-
gestion that there would be a moratorium of perhaps three
years before CLF begins to service the principal of the estimated
$3.3 billion debt.
During that moratorium period, will Lawrence Duprey and
the other CLF shareholders get to share in Angostura's dis-
And if Angostura decides not to make distributions during
the moratorium period---so as to ensure that CLF does not
profit---does GORTT not risk a shareholder revolt and legal
actions as a result?
Another hypothetical: If GORTT imposes a 5 per cent rate
of interest on the $3.3 billion debenture, that means that the
three companies retained by CLF would need to generate $165
million a year in interest payments to service the lien. Given
the pre-existing $2.5 billion of debt that HCL and CL Marine
have on their books, wouldn't most of the debt obligations
fall to Angostura in the moratorium period?
If the CLF resolution proposal currently before Cabinet,
allows the group's shareholders to see one cent in benefit, it
would set dangerous precedents, cause unintended consequences
and expose the Government to a series of new lawsuits.
One obvious lawsuit would be from holders of EFPAs who
accepted the Government's proposal (which involved taking
a haircut on their investments) and who would be forced to
sit quietly as Government pays those who did not accept the
offer 100 per cent of their investment.
Disclosure: The writer of this column is the owner of Angostura
Ministry of Finance on CLF issue
Different rules apply
What does receiving value mean?
Continued from page 3
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