The Central Bank yesterday said the interests of Clico, the insurance company that is under the control of the bank, will be “best served” by complying with the award of the arbitration tribunal in its valuation of Methanol Holdings (Trinidad) Ltd, which is 56.53 per cent owned by Clico. The Government is hoping to maximise the amount of money raised from the sale of assets of CL Financial, which owns 51 per cent of Clico, in order to recover about $20 billion that was advanced to the group by the State.
In its first comment on the issue of the tribunal valuing the Clico stake in MHTL at US$1.175 billion, the Central Bank also recommended “carrying out the prescribed steps within the relevant time limits.” The Central Bank noted the following points about the arbitration award, which involved Clico, the majority shareholder, and Consolidated Energy Ltd (CEL), the minority shareholder, which comprises German companies:
• The tribunal’s decision on price and remedy was made in contested litigation. Parties argued for widely differing valuations of the fair market price of MHTL for which it is difficult to identify satisfactory market comparables.
• The purchase price of US$1,174 million for the 56.53 per cent stake of MHTL set by the tribunal is consistent with the valuation evidence put before it by independent valuation professionals.In particular, the tribunal placed weight on the PwC valuations of 2009 and 2011 as well as the Duff & Phelps valuations of 2012 and 2013.
• The purchase price of US$1,174 million is almost US$560 million higher than the price of US$615 million argued for by CEL.
• The valuations on which the tribunal placed weight all recognised that a liquidity discount should apply, on the basis of difficulties of finding buyers for an unlisted methanol company and the important restrictions contained in the MHTL shareholders’ agreement.
Empirical evidence on transactions of this nature suggests such liquidity discounts typically range from 20 per cent to 30 per cent. CEL’s valuation expert argued for a 25 per cent liquidity discount to the valuation of MHTL. The tribunal eventually concluded that 20 per cent was an appropriate liquidity discount.
Howai responds
Minister of Finance and the Economy Larry Howai responded on the matter yesterday. He said, “This is an extremely sensitive matter at an extremely sensitive stage. The court of arbitration has ruled and while we are bound by convention to accept the ruling, the MOFE, in the interest of the citizens of Trinidad and Tobago is carefully examining the ruling to ensure that all is as it should be.
“The MOFE and the CBTT are in continuous communication regarding the issue. The shareholders have been given 14 days in which to react to the ruling and the MOFE has been using this time to explore all options open to us. “Please be assured that it is our intention to abide by the timeframe set by the court.”
