The plan by CL Financial (CLF) majority shareholder Lawrence Duprey to repay the group’s “bailout” debt to Government involves the creation of two Clico entities, one of which should have a total asset base of $10 billion and focus solely on meeting the obligations of traditional policyholders.
Duprey detailed the proposal in a March letter to the Central Bank governor and Finance Minister Colm Imbert.
It’s part of current moves to try and regain control of his former companies following the 2009 CLF collapse and subsequent government bailout and in the face of current government consideration to dispose of Clico assets, and possibly CLF’s, to recoup the bailout funding.
In an exclusive Guardian report last Thursday, Duprey confirmed that he was heading to legal action to block any asset sale since there had been no word from the Central Bank or the Ministry of Finance on his proposal.
Compounding the situation, the United Policyholders Group, comprising Clico policyholders, subsequently on Friday demanded attention from the Central Bank and Government on issues they also have.
In Duprey’s letter to Central Bank, he said: “The outline of the plan I have presented addresses the obligations of Clico and has not addressed the TT$2 billion injected into Clico Investment Bank. Having taken the decision to liquidate the institution, my team and I are ready to explore potential alternatives which can enhance the payout to the remaining institutional creditors without a liquidation of the valuable assets.
“In addition no attempt has been made to collect from defaulting obligors. Nevertheless we remain committed to settling all obligations.
“The plan outlined herein to repay (i) Preferred Shares (ii) All EFPA outstanding over a ten year period, and in the case of the preferred shares—five years represents a reasonable base for discussions between the Central Bank as regulator and my team of advisors...I hope we can put the two teams together that will result in a contractual and full payout of all government outstandings.”
Duprey said he had appointed Dr Brian Harry and Steve Bideshi, his financial advisors, to meet with Central Bank Governor Alvin Hilaire to discuss the proposal. Harry is a consultant and former president of the defunct Tourism and Industrial Development Company (TIDCO), while Bideshi is a retired Citibank executive who served as the CEO of CL Financial between July 2009 and January 2010.
In the letter to the Central Bank, Duprey said his proposal is based on Clico’s audited 2013 results and subsequent media releases.
“My financial advisors and I have also met with executives of Goldman Sachs, Morgan Stanley and Citibank to understand the terms and conditions of leverage to be provided to the group, which is essential to the effectiveness of the repayment programme.
“We’re of the opinion that the optimal solution to maximising free ‘cash flow’ to repay the Government lies in the adoption of the good bank/bad bank concept utilised in the global banking industry to resolve state bailout repayments. The most applicable one is the Citigroup model where the bank continues to present annual financial statements for Citi Holdings—(bad bank) & Citi Corp (good bank).”
Duprey proposed creating two legal entities—Clico traditional and Clico non-traditional.
He said Clico traditional will retain sufficient assets to support traditional insurance legacy liabilities.
“Based on 2013 audited results, this entity should have a total asset base of approximately TT$10 billion and should be completely compliant with the new insurance act and will focus solely on meeting the obligations of the traditional policyholders and the redemption of the preferred shares owned by Government amounting to TT$4.9 billion.”
He added: “We believe that Clico, after the receipt of proceeds from the sale of Methanol Holdings can repay a further TT$3 billion (TT$4 billion was made in Fiscal 2014) towards the retirement of EFPA, thus leaving an estimated balance of TT$4.5–4.8 billion to be serviced on terms and conditions agreeable to both Government and our group of companies over a 10 year period.
“We’re of the opinion that Clico may not need 10 years to fully redeem the $4.9 billion preferred shares but by year five should be in a position to execute a local capital markets solution for TT$2.5 billion to fully repay Government the balance outstanding.”
Duprey said the present process of “selling” Clico’s traditional portfolio erodes the financial base for the full repayment to the Government. He asked Government to halt the process immediately.