(Trinidad Express) Home Construction Ltd (HCL), a subsidiary of cash-strapped CL Financial Ltd (CLF) has sold two of its malls-Atlantic Plaza and Valpark Shopping Plaza.
But CLF, which is controlled by the State, has executed the deals for the prime pieces of real estate without the knowledge of the government.
The Sunday Express understands that both malls were acquired by CIC Holdings, an investment company whose major shareholders are two former CLICO Investment Bank (CIB) directors.
The Sunday Express was told that approximately TT$60 million was paid for the Point Lisas-based Atlantic Plaza while TT$102 million was paid for the Valsayn-based Valpark Shopping Plaza.
The sale of the malls was first made public in an Express exclusive story on January 30.
HCL had contracted auditing firm Ernst and Young to conduct the sale to select companies and individuals, including the ANSA McAL Group of Companies, Issa Nicholas Holdings Ltd, the Hadeed Group of Companies, MovieTowne’s Derek Chin, Bhagwansingh’s and the Gopaul Group of Companies.
However, after the story was published Prime Minister Kamla Persad-Bissessar intervened to halt the sale.
Finance Minister Larry Howai then directed that HCL suspend the sale, based on a Cabinet decision, until a report on the sale could be obtained.
HCL subsequently sought legal advice on the Cabinet’s decision to suspend the sale and the legal implications for the directors if they complied with the directive.
On February 13, Steven Singh, managing partner at Johnson, Camacho and Singh sent legal advice to CLF chairman Gerald Yetming on the proposed sale of the malls as well as another asset Trinidad Hotels Ltd (Holiday Inn Express).
Singh observed that the sale was precipitated by the fact that HCL was now in default of loan payments to its principal creditors, First Citizens and the Unit Trust Corporation (UTC) and that it has some TT$80 million due to other third party creditors.
Singh noted that CLF and its subsidiaries remained a privately held company, albeit with a Government-nominated majority on the board of directors.
“GORTT does not control the Board who must at all times act independently in accordance with the Trinidad and Tobago Company Law.
“At this point in time CLF’s subsidiary HCL finds itself at a critical juncture, it is in default of its loan to its principal creditors FCB and UTC. It is also readily apparent from the financial status of HCL that it is unable to service its debt repayment from its monthly/yearly revenues. Thus, if not attended by the sale of assets this could result in events of default precipitating the creditors to step in. The timely sale of HCL’s assets goes to the heart of its survival. Moreover, there are examples that in the past delays in the sale of assets have led to depreciation in the value of offers made,” the Singh opinion stated.
He further opined that: “It was GORTT that expressly bought into the principle of their appointed directors adopting the highest standards of good corporate governance and the law would not allow then to resile from this accepted standard. Thus, if the directors are inclined to accept Cabinet’s directive, they will not be acting in the best interests of the company having regard to all of the current financial situation which face HCL.”
“In addition to potential lawsuits from creditors, albeit against the company, there is a danger of the directors being in breach of their fiduciary duties owed to the company…In the case of a suit against directors, it is readily apparent that the loss sustained would be the difference in the anticipated sale price and that of the ‘forced sale price’ if creditors do step in. Furthermore, in any lawsuit, the Ministry of Finance’s directive would be discoverable and would be construed as incriminating evidence of the directors acting for some other reason other than in the best interest of the company,” Singh’s advice concluded.
In an interview with the Sunday Express published on March 9, Howai had explained that the sale had been suspended because of ongoing negotiations with CLF shareholders as the government sought to exit from the conglomerate.
He had said while the transaction had the appearance of a “fire sale”, it was not.
“It is very clear the whole issue of disposal has to be properly managed as we go forward,” he said then.
On Friday, in response to questions by the Sunday Express on the sale of the malls, Howai said he was unaware that the assets had been sold and directed those questions to CLF chairman Gerald Yetming.
“The CLF Group has ongoing obligations to its creditors which must be met if the company is not to be put in liquidation by these same creditors. This would require Government to come up with the cash to meet the claims of these creditors if CLF was unable to pay which means that if they sell or not it leaves Government in the same position.
“In addressing the problem, the Group would have evaluated the assets it has, considered its cash needs, determined which assets have the potential to create the most synergies and have the best potential for future increases in value. The best assets they would keep and those they evaluate as adding the least incremental value they would have determined they should sell to meet their cash needs,” he said.
Questioned on whether the CLF, or in this case HCL, disposing of assets could impact on Government’s TT$21 billion claim on the company as well as subsequent negotiating clout in the ongoing Shareholders Agreement, Howai conceded that it does have an impact.
“This does impact Government but you need to remember that many of these creditors rank ahead of Government as secured debenture holders since one of the problems I face is that we did not take security for the sums advanced when the support programme was put in place a few years ago. The end result is whether they sell or not Government is in the same position as the debts they repay would have had to be paid ahead of Government’s debts in any case,” he clarified.
The CLF empire, once owned by former insurance executive Lawrence Duprey, has been under Government’s management since January 2009.
The Government intervened in cash-strapped CLICO in January 2009. To date, the Government has spent about $25 billion in managing the CLICO fallout, going after principal players of CLF from civil proceedings being pursued by the Central Bank to criminal proceedings by the Trinidad and Tobago Police Service, as well as a two-year-long Commission of Enquiry to determine the cause of the collapse.
Contacted last Wednesday, CLF chairman Yetming declined to comment immediately.
