Jul 2010 Financial News

Give CLICO more money

Jul 07, 2010

CLICO, the country's largest insurance company, now needs more money to repay thousands of policyholders, consultants have recommended in a report delivered to Cabinet by Finance Minister Winston Dookeran.

Even with a massive cash injection, which would follow the approximately $5 billion already raised to rescue CLICO last year, the struggling company that was once the jewel in the CL Financial crown, would only be able to repay policyholders the principal amounts they put into CLICO investment products, the report said.

Dookeran prepared the report and presented the findings by consultants who were contracted by the Central Bank to Cabinet last month.

He read excerpts of the report dated June 11 to reporters at a post-Cabinet press briefing last month.

The document was titled "Report on the Nation's Business—the state of our finances and initiatives for future action".

It states that CLICO policyholders can get only principal and no interest on their investments over a five-year period, "provided there is a further injection of capital".

At a post-Cabinet briefing last month, Dookeran announced former Citi banker Steve Bideshi, former finance minister Wendell Mottley and accounting expert Colin Soo Ping Chow as the team that would provide recommendations on CLICO and its parent CL Financial.

Their report, which listed a number of recommendations to restructure CLICO and CL Financial, and help both companies repay millions in debt, was submitted to Dookeran recently.

But even before this, a group of consultants, cited in the Dookeran report, said CL Financial may be "technically bankrupt" on a group consolidated basis.

But when CLICO and now defunct investment house CLICO Investment Bank are stripped from the consolidation, the remaining assets of CL Financial, such as spirits producers Angostura and Lascelles de Mercado "exhibit economic viability and appear attractive to global companies", the Dookeran report said.

Sources have said that CL Financial debt burden is currently in the area of $15 billion and that CLICO incurred losses in 2008 of about $6 billion.

Dookeran's report listed several challenges for CLICO and CL Financial, including ensuring that strategic assets at the companies had the right management and financial plant to repay bank debt, that non-core assets were quickly disposed and that CL Financial repay CLICO its outstanding inter-group debt which would assist CLICO in its own operations.

Sources close to the Bideshi team said their submission to Dookeran last month included a menu of options for the repayment of CLICO's traditional and non-traditional insurance liability products.

It detailed a financial reorganisation of CL Financial, as mandated by Government, to ensure bank and inter-party debts were repaid.

Sources said the Bideshi team's plan reflected CLICO and CL Financial's debt and made several recommendations, including selling off some valuable but non-core assets.

It also delivered a timetable on how long the restructuring would take and how Government would be able to collect on its loans to CL Financial last year.

CL Financial controlled $100 billion in assets spread across more than 70 companies in 34 countries.

But it was saddled with rising debt and outstanding repayments in January 2009 after investors and creditors demanded hundreds of millions of dollars back from CLICO and CIB.

The government has not yet said how it will act on the recommendation of the Bideshi report.

In the meantime, some policyholders have received repayments on their CLICO investments while hundreds more still have not been repaid.


Source:
Curtis Rampersad
Business Editor
Trinidad Express
Wednesday July 7, 2010

http://www.trinidadexpress.com/news/GIVE-CLICO-MORE-MONEY.html