Sep 2011 Financial News

Dookeran tells of plan to solve Clico problem

Sep 15, 2011

Finance Minister Winston Dookeran yesterday unveiled an enhanced plan for settlement of the Clico issue.­ He did so during yesterday’s House of Representatives sitting while presenting the Purchase of Certain Rights and validation Bill 2011 for debate. The legislation is intended to bring Government closer to resolution of the Clico financial bailout issue. Dookeran also made an impassioned appeal to put the national interest before individual rights. He said the Government was seeking to put back certain legal provisions to ensure the company could be restructured without the threat of legal challenges. He said over the last year “we had hoped that such legal challenges will fade away because of the national interest. Very often parliaments are asked to make a decision between private rights and public interest. it is the responsibility of the Parliament to support public interest.”

Dookeran added: “Those who wish to pursue the route to seek private rights, at the risk of causing a liquidation, will be doing so at the disservice of the national common good of the T&T.” He said the plan provided for the issuance of bonds to be used to retire the remaining indebtedness of policy- holders. He said the bonds to be issued possess several features to facilitate their easy administration and minimise the hardships already experienced by Clico/BAT investors. Dookeran said the bonds were to be issued in electronic form because it was a more efficient system of managing bonds. He said that the system also contained fewer risks to the bondholders and could be administered faster and facilitate easier transfer of bond-holding.

The bill provides for the minister to make payment in any form whatsoever. It also provides for the bonds to bear the same issue date, despite the date of acceptance by holders and mutual fund investors. He said that would circumvent administrative difficulties that would otherwise be created by variations in maturity date. The plan also provides for :

• The bonds to issued in denominations of $1,000 to facilitate the eventual trading of the bonds on the secondary market;
• bonds shall not be listed on the stock exchange for a period of six months from the date of issue in an effort to make them more attractive for the holders and mutual funds investors to sell their bonds over the counter thereby maximising their potential recovery: and
• the bonds shall be deemed securities in respect of which registration with the Securities and Exchange Commission is not required so as to circumvent any administrative delays associated with having the bonds registered at securities.

The bill will ease the hardships faced by approximately 16,000 persons who hold deposits and mutual funds with Clico and British American (Trinidad) Insurance Company to the value of more than $75,000. Dookeran said the bill provided for Government to buy the relevant rights, by making payments in any form whatsoever, including through the issue of bonds, on assumption that 100 per cent of the investors would offer the Government’s offer of payments. He added that the bonds would not exceed, as the aggregate, the sum of $10.7 billion and would result of an annual cost of $500 million.

He said after prolonged discussion, involving the Government, the Central Bank and the representatives of the financial sector “we have now enhanced the payout regime that results in the substantial increase in the returns to the investor.” He added: “While this new proposal retains a discounting mechanism for the Government bonds of one to ten years maturity, it introduces a new mechanism for the longer maturity bonds, designed to significantly increase the return to investors in the over $75,000 category.” Dookeran said: “This new mechanism utilises the RBL (Republic Bank) shares currently held by Clico in a trust earmarked to benefit the Clico investors and we call it NEL 2.


Source:
Richard Lord
Trinidad Guardian
Thursday September 15, 2011

http://www.guardian.co.tt/news/2011/09/15/dookeran-tells-plan-solve-clico-problem