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Financial News

Feb 2009 Financial News

Lee Chin in buyout talks for CL assets - CLICO's 40% of JMMB in billionaire's line of sight

Feb 25, 2009

Michael Lee Chin's AIC is leveraging about US$150 million of unused cash it says it has in its Caribbean private-equity fund in a bid to acquire portions of troubled financial group CL Financial's prime assets.

Lee Chin says the Trinidad deal, if clinched, could land him one or a mix of financial assets, including insurance companies CLICO and British American, their subsidiaries in several Caribbean countries, a 55 per cent stake in Trinidad's Republic Bank, CLICO Investment Bank (CIB), Caribbean Money Market Brokers and a 40 per cent holding which CIB and CLICO have in Jamaica Money Market Brokers.

Looking at the opportunities

"I was in Trinidad this week and last week looking at the opportunities with respect of certain assets of CL Financial," Lee Chin, AIC's executive chairman, confirmed to Wednesday Business towards the end of last week.

"We are looking at the best way to participate."

The Jamaican-Canadian billionaire already has a presence in the twin-island republic through AIC Trinidad, a troubled mutual-fund subsidiary that was restructured more than a year ago.

But he is not the only suitor, and will likely have to go up against CIBC of Canada, which, our sources have said, has a proposal before the finance ministry to acquire the 55 per cent of Republic Bank on offer.

His bank, the National Commercial Bank of Jamaica, whose stock also trades on the Port of Spain exchange, is already a fierce rival in the Jamaican market with CIBC's regional subsidiary FirstCaribbean International Bank.

No details disclosed

Lee Chin would not disclose details of the talks now under way, nor whether they involved both the Trinidad government/central bank and principals of CL Financial, saying only they were "beyond preliminary" and represented what he described as "real and fantastic opportunities".

Not wanting to give away his company's negotiating hand or pre-empt any possible deal, Robert Almeida, executive director of AIC Global Holdings and the man who heads up AIC's international division, said right now "there are no deals done".

However, his boss Lee Chin, AIC's executive chairman, indi-cated that his company's US$250-million Caribbean equity fund - US$100 million of which he said is already invested in the region - was the vehicle being used in the CL asset purchase bid.

He named the US government's Overseas Private Investment Corporation (OPIC), the European Investment Bank (EIB), Export Development Corporation of Canada, Caribbean Development Bank and the pension fund of US telecoms giant, Verizon, as his partners in the equity-financing venture.

AIC project documents further describe the AIC Caribbean fund as a private-equity limited partnership created around 2006 with the objective of raising US$400-million for long-term capital appreciation by making equity and investments in a diversified portfolio of companies located in 20 Caribbean countries.

The fund was a follow-on to the AIC's first Caribbean fund, now said to be fully invested at US$260 million. The original investment strategy called for investing in six to eight companies in the Caribbean with an 80 per cent focus on Jamaica, Trinidad and Tobago and the Dominican Republic.

The precise distribution of shares among partners in the fund is not known, but OPIC's 2007 annual report declared a US$80-million investment in the fund, with an EIB January 2007 document detailing an investment of €45 million, said to have been invested in the Caribbean services sector.

A proposal seeking approval of US$20 million from the World Bank's International Finance Corporation (IFC) early last year is listed on the corporation's website as having been "dropped".

Strong development impacts expected

"The fund is expected to deliver strong development impacts by providing scarce equity capital in the Caribbean region and by supporting regional consolidation in target industries such as energy, financial services and telecommunications," the IFC document reads.

"The fund will be the largest private-equity fund in the region and it is expected to be a strong catalyst for the development of the regional private equity industry."

AIC's Almeida adds: "We also operate globally. We invest in and operate in many industry sectors with a very strong focus on the financial services sector. We have access to local and global investors."

Responding to questions from Wednesday Business about whether AIC, as a global financial adviser, had a role in helping the Trinidadian government unravel what it has declared a maze of interconnected dealings within the CL group, and what assets were being looked at, Almeida said, "AIC has a strong Caribbean purpose, focus and presence. It is only logical that we would offer our services to assist in whatever way we can in all jurisdictions of the region and that we would consider acquiring any assets that may become available for sale."

In a February 13 update on the CL Financial rescue, TT central bank governor, Ewart Williams, conceded that the financial position of CLICO appears to be much worse than originally envisaged.

The government moved against the Lawrence Duprey-led conglomerate after its main financial services operations ran into a major liquidity crisis, its cash apparently having been leveraged on a widely diversified and high-risk investment spree.

CL Financial also owns 86 per cent of spirits conglomerate Lascelles deMercado - with 92 per cent voting rights - but keeps insisting that the Jamaican business is not targeted for takeover by Trinidad.

Huntley Medley, Contributing Editor - Business
Jamaica Gleaner
Wednesday February 25, 2009