Home' Trinidad and Tobago Guardian : August 29th 2013 Contents AUGUST 2013 • WEEK FIVE www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
Chief editor-business: ANTHONY WILSON
Editing and design: NATASHA SAIDWAN
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In everything that has been written in this space on the
CL Financial issue, the focus has been on what con-
stitutes the national interest.
The budget for the 2011 fiscal year was presented by former
minister of finance Winston Dookeran on September 8, 2010.
In that budget presentation, Mr Dookeran accused the former
administration of misdiagnosing as a liquidity issue a financial
problem that turned out to be a solvency issue and accused
the regulators (which would have been the Central Bank) of
failing to provide adequate oversight of the issue.
Mr Dookeran told Parliament in the first budget speech of
the People s Partnership s term of office that he was stopping
the interest payments on all Executive Flexible Premium Annu-
ities---the short-term insurance product called EFPAs or short
term investment products, STIPs, that Clico and British Amer-
ican sold to people seeking above average investment yields.
He also proposed to pay all those with EFPAs whose principal
balances exceeded $75,000 through a Government IOU amor-
tised over 20 years at zero interest.
"This Government IOU would be structured in such a way
that it could be traded on the secondary markets, thereby cre-
ating a measure of immediate liquidity for the depositors,"
according to Mr Dookeran s 2011 budget.
Under the headline "Is the Dookeran Plan in the national
interest?" which was published in this space on September
23, 2010, some 15 days after the presentation by the finance
minister, the following questions, among several others, were
I took the liberty of quoting something that I wrote nearly
three years ago, to make the point that attempts have been
made in this space to define what is in the national interest
in the CL Financial issue.
To answer the question raised in the headline of this column,
it seems to me that it would be in the national interest for
both the Government and the CL Financial shareholders to
accept the framework of the Howai Plan that is currently
before the Cabinet---if changes are made to it.
There are two aspects of the framework of the Howai Plan
that few people can disagree with:
1) That the CL Financial board structure should remain in
place during the new shareholders agreement, that will replace
the original three-year agreement that was signed in June
2009 (and has been extended five times, if one is not mistaken).
The original shareholders agreement envisages that the
Government should be able to appoint four of the seven
directors on the group s board, which gave the State a majority
on the board.
The new shareholders agreement allows Government to
appoint three of the seven directors on the CL Financial board,
which gives the shareholder directors the majority on the
Most of this population would feel more comfortable if the
original structure with regard to the board appointments
remained in place as long as CL Financial owes the Government
The second issue that there is sure to be agreement on is
the need to sell CL Financial assets in order to pay off the
group s creditors.
That is something that everyone can agree is a necessary
step to resolve the issue.
In fact, selling CL Financial s assets in order "to correct the
financial condition of CIB, Clico and British American and to
protect the interest of depositors, policyholders and creditors
of these institutions," is the foundation of the Memorandum
of Understanding that was signed by former CL Financial
executive chairman Lawrence Duprey and former finance min-
ister Karen Tesheira on January 30, 2009.
The MoU specifically said that CL Financial agrees to take
steps to correct the financial condition of CIB, Clico and British
In accordance with the agreed position outlined in the
January 30, 2009, MoU, it may be a good idea for the share-
holders and the Government to explore the possibility of selling
the 52 per cent stake in Republic Bank that is under the control
of the CL Financial group.
Selling a majority stake in the bank sidesteps the issue of
the control premium outlined in the July 4, Letter of Intent
and ensures that the creditors gain maximum benefit from
But selling a majority of the bank would mean unravelling
the Clico Investment Fund and replacing the 40 million Republic
Bank shares in that investment with high-yielding Government
bonds. It would also mean carving out the Republic Bank
shares held by Clico Investment Bank, which is in liquida-
The logic behind selling control of Republic Bank is that
the value that can be derived from selling 80 million of the
bank s shares---which is what the CL Financial group holds---
would be much greater than selling a minority stake.
The sale of a majority stake in Republic Bank plus a majority
stake in MHTL would be enough to ensure that taxpayers are
made whole out of this issue.
CL Financial s other creditors can be settled by the sale of
other of the group s assets. As I have argued before, if there
is a surplus after all of the creditors have been paid off, then
that value should go to the shareholders of CL Financial.
In may turn out to be in the national interest to follow the
MoU after all.
What is the national
interest in the Howai Plan?
Alison Lewis, permanent secretary Ministry of Finance
Finance Minister Larry Howai
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