Finance Minister Larry Howai yesterday defended a Note he took to Cabinet earlier this month in which it is proposed that CL Financial shareholders would retain assets worth $1.67 billion, while the Government, which bailed out the group in January 2009, receives an estimated sum of $15.1 billion and third-party liabilities are settled to the tune of $16.3 billion.
The Cabinet Note, dated July 9, with accompanying documents, was leaked to the T&T Guardian on Monday with an unsigned cover letter which said that “a plot is afoot to manoeuvre an outcome which will result in taxpayers handing over control of the remaining assets of the CL Financial group to the shareholders via their frontmen without fair value.”
Yesterday, at a meeting he requested with the T&T Guardian at the Ministry of Finance, Howai described the proposal to Cabinet as “the best arrangement possible, given all the circumstances.” At the interview with Howai, who admitted that he had faced some opposition from his cabinet colleagues to the resolution proposal, were his permanent secretary Vishnu Dhanpaul and advisers Alison Lewis, retired permanent secretary, and Colin Soo Ping Chow, the executive chairman of Ernst & Young Caribbean.
An Ernst & Young analysis, included with the Cabinet Note, reveals that the Government had made an original claim of $19.6 billion against CL Financial, but that the Government had agreed to reduce the claim to $18.4 billion by removing $600 million in payments made by the Government to bail out CMMB, which was acquired by First Citizens for $1 dollar in June 2009. CL Financial has assets with a median estimated value of $33.1 billion.
Of that sum, it is proposed that assets worth $31.4 billion are to be divested, with CL Financial retaining assets worth $1.6 billion—comprising 51 per cent of Angostura, worth $1.2 billion; 51 per cent of HCL, worth $215 million and 100 per cent of CL Marine, which is valued at $200 million. The group would also retain some $50 million of cash, according to the proposal.
Of the $31.4 billion in CL Financial assets to be divested, the Cabinet Note envisages that the CL Financial group would use $16.3 billion to settle third-party liabilities and $15.1 billion to repay government debt. This means that the group would continue to owe the Government $3.3 billion, given valuations at the middle of the range. At high values for the assets, CL Financial would be able to repay $16.6 billion of government debt, leaving the group with a $1.8 billion debt to the Government and net positive assets.
Howai said the Government would ensure that CL Financial makes good on its billion-dollar debt to taxpayers by implementing a debenture over the fixed and floating assets of Angostura, HCL and CL Marine and by instituting a number of default provisions and other covenants in the new shareholders agreement that would replace the existing one.
The Cabinet Note envisages that the new shareholders’ agreement would remain in force until the full repayment and satisfaction of the financial support provided by the Government. Under the new agreement, the seven-member CL Financial board would have three government-appointed directors—down from four under the current shareholders’ agreement, which was signed in June 2009.
Under the new agreement, the approval of the government-appointed directors would be required for new borrowings, the issue of shares, capital reorganisations, investments/acquisitions and the sale of assets and the payment of dividends and other forms of distributions. Howai said that the repayment terms and interest rates for the debt are to be agreed. He said that a three-year moratorium on principle payments was being discussed, but had not been finalised.
The shareholders of CL Financial are due to hold an annual meeting today at which the new shareholders’ agreement is due to be considered.