Apr 2009 Financial News

$5b rescue plan for CLICO

Apr 24, 2009

Government will spend $5 billion during the next two years to rescue Lawrence Duprey's CL Financial conglomerate and its struggling insurance companies.

Central Bank Governor Ewart Williams confirmed yesterday that the government is expected to inject $5 billion to continue to protect policyholders of CL Financial subsidiary CLICO and depositors of failed wealth management firm CLICO Investment Bank (CIB).

This follows the January 30 agreement signed by CL chairman Lawrence Duprey and Finance Minister Karen Nunez-Tesheira to provide financial assistance to CL Financial companies.

Earlier this year, Williams had suggested that CLICO-the country's largest insurance company- had a "notional deficit" of around $10 billion.

"We envisage that the required Government funding is around $5 billion for the next two years," he told reporters yesterday at a press conference at the Central Bank Auditorium in Port of Spain.

The agreement hammered out on January 30 states that the State would provide funding to protect policyholders and investors after CL Financial companies experienced severe liquidity problems.

This included CLICO which could not meet pension and insurance claims and CIB which could not repay depositors like the National Gas Company (NGC).

In a statement released minutes before Williams spoke, the Central Bank said there was no evidence that CL Financial's troubles had any ongoing contagion effects in the rest of the financial system.

He explained later that the Bank and Government provided the funding on the assumption that the sale of certain CL Financial and CLICO assets would be enough to reimburse Government.

He said there would be no "fire sale" of these assets which include a 55 per cent stake in Republic Bank and a major shareholding in energy company Methanol Holdings.

"In the next year or two, it is unlikely one would go on a fire sale of the assets and for the next year or two, resources need to be provided by the State," Williams said.

The Express reported on Tuesday that Government was also divesting $315 million out of the Caricom Petroleum Fund to help cash-strapped CL Financial subsidiaries in the Eastern Caribbean islands.


Source:
Curtis Rampersad
Trinidad Express
Friday, April 24th 2009

http://www.trinidadexpress.com/index.pl/article_news?id=161468851