…company to announce new payment schedule
(Trinidad Express) The Government has issued bonds valued TT$3.4 billion to Clico, in a move that may bring some relief to the thousands of depositors and policyholders who have experienced delays and difficulties in getting funds from the beleaguered financial institution. The bonds, which are fixed rate, were issued on February 4 in three tranches of 17, 19 or 21 years, and will generate at least TT$227 million in interest payments annually, with payments being made twice a year, starting on August 4. The bonds, listed on the Stock Exchange Web site on February 10, are listed below:
1. A 17-year bond for TT$1.4 billion paying 6.6 per cent;
2. A 19-year bond for TT$1 billion paying 6.7 per cent; and
3. A 21-year, TT$1 billion bond paying 6.8 per cent
With new government paper valued TT$3.4 billion on its balance sheet, Clico would be in a position to use the bonds as collateral to raise additional cash, financial sources disclosed. This process, referred to as a repurchase agreement or a repo, is normally used by companies to raise short-term money, and would allow Clico to raise more than TT$3 billion over the life of the three tranches of the bond. In exchange for the bonds, worth TT$3.4 billion, the Government will receive a shareholding in Clico of the same value, the Guardian understands. Clico equity, in the form of ordinary and preference shares, will match the TT$3.4 billion increase in the Government’s debt.
The issuing of ordinary and preference shares in Clico is in line with the January 30, 2009, Memorandum of Understanding signed by Minister of Finance Karen Tesheira, Central Bank Governor Ewart Williams and former CL Financial chairman Lawrence Duprey. Clause 14 of the MOU states: “In consideration of its significant financial exposure to Clico Investment Bank, Clico and British American, Government will receive appropriate shareholdings in Clico and British American.” On January 13, last year, Duprey met with Governor Williams and Inspector of Financial Institutions Carl Hiralal, CL Financial, and formally raised the issue of possible financial assistance from the Central Bank. Those discussions culminated in the signing of the MOU.
On February 13, 2009, Williams said the 2008 deficit in Clico’s statutory fund—insurance companies in T&T are required to match their liabilities with unpledged assets—amounted to TT$5.1 billion. But he added that if Clico’s related party assets were excluded from that year’s statutory fund calculation, “the notional deficit rises to TT$10 billion, on a policyholder liability base of TT$16.7 billion.” It was based on the discovery of the TT$5.1 billion statutory fund deficit that the Government pledged to pump over TT$5 billion into Clico. A financial source said the TT$3.4 billion bonds completed Government funding to the tune of TT$5.4 billion, as TT$1.9 billion in cash was made available to the company shortly after its collapse. Clico sources said on Saturday that the insurance company was expected to announce a new, formal schedule for payment of overdue policies and deposits in the near future.
