Chairman of the Clico Policyholders Group (CPG) Peter Permell wants to know who stands to benefit from the forced liquidation of CL Financial.
The head of the Clico Policyholders Group said he would prefer to leave that question for the taxpayers of T&T to figure out but said it is not likely to benefit taxpayers, policyholders, employees and shareholders.
“What I also know is that from as far back as 2009, forced liquidation, or the nuclear option as it is referred to in the literature, was always a potential strategy on the table but was never used because the devastating effect and untended consequences that will inevitably flow from such a decision,” he said.
Permell’s comments follow Government’s decision to appeal the ruling of a High Court judge who rejected its application for the appointment of two provisional liquidators for CL Financial. He said a PricewaterhouseCoopers (PwC) report last year and a report from Pannell Kerr Foster in 2013 had warned against forced liquidation.
The Pannell Kerr Forster report said if action were taken to force CLF into liquidation at that time, certain events would ensue—Home Construction Limited’s (HCL) loans with First Citizens Bank (FCB) totalling $1.1 billion would be put in jeopardy and the bank might have been forced to put HCL into receivership.
“The HCL loan with PMCL/UTC in the amount of $360 million will be put in further jeopardy and PMCL/UTC may have to follow FCB in the receivership course of action. An HCL receivership will cause serious disruption in that sector of the economy,” the report said
It further stated that “by the time liquidator ends his/her assignment, FCIS/CMMB stood to lose 69 per cent of its $700 million loan with CLF— $483 million—and the State would not recover any shortfall resulting from the inability of Clico. CIB and BAT being unable to satisfy their respective obligations under the MOU. This amount has been optimistically calculated to be $2.8 billion.
“When the above figures are totalled they amount to an exposure of $3.3 billion at the end of, at best, 30 months from the date that the liquidator is appointed.”
The PwC report said the nuclear option could result in a loss of $7.3 billion in value and a delay in recovery of funds by Government of more than three to five years subject to court decisions and appeals.
Permell said former Central Bank Governor Ewart Williams had acknowledged the contagion risks that financial difficulties in an institution as vast as the CL Financial Group could have on T&T’s entire financial system and the entire Caribbean region.
At the time Williams said: “The group’s financial interests cover several industry sectors, including banking and financial services, energy, real estate and manufacturing and distribution.
The four largest financial institutions in the group manage assets of over $38 billion, over 25 per cent of the country’s GDP. In addition to Clico, among the group’s holdings is the British American Insurance Company Limited, which is one of the main insurance companies in the Eastern Caribbean.”