T&T Gov't gives bailout to CL financial

The government of Trinidad and Tobago announced on Friday that it has taken over Clico Investment Bank and will take charge of one of its subsidiaries, Caribbean Money Market Broker (CMMB) next week. The assets would be transferred to the state-owned First Citizens Bank. The two companies are owned by CL Financial, one of the country's largest and most successful financial organizations.

Government will put money into the country's biggest insurance company, CLICO, and British American Insurance in return for equity interest in order to protect depositors and policy holders.

CLICO has more than 100,000 policy holders and provides group pension plan services for thousands of workers in the country. CLICO may also begin trading on the local stock market but its investment bank, CIB, will be dissolved next, with 20 of its 100 employees losing their jobs immediately and the rest of the jobs disappearing later.

The surprise financial announcements bailing of the CL Financial group were made by Central Bank Governor Ewart Williams and Finance Minister Karen Nunez-Tesheira. CL Financial chairman Lawrence Duprey admitted that he had underestimated the global and local financial troubles.

He said it became impossible for CL's insurance flagship firm CLICO to pay depositors who wanted their money back. Duprey said he approached the Central Bank for help on January 13 to raise the issue of financial assistance from the Bank.

Duprey would have to sell some of CL Financial's lucrative assets in return for Government's cash and support. It means surrendering its 55 per cent stake in Republic Bank Ltd, the country largest commercial bank. The assets are worth billions of dollars.

Government would become the principal shareholder in Republic Bank, with the National Insurance Board and First Citizens taking control. Duprey would also have to give up shares in CL Financial's energy firm Methanol Holdings Trinidad Ltd, which owns and the world's largest methanol plant.

Neither Government nor the Central Bank said how much bailout money CL is getting but the central bank governor explained that it became necessary to intervene after a serious demand from clients for withdrawals put a severe strain on the the company's liquidity.

"The principal objectives are to ensure that resources are available to meet withdrawals of third-party CIB depositors and Clico policy holders; to protect the funds of the depositors and policy holders and in so doing maintain confidence in Clico," Williams said.

Duprey told the Trinidad Express he was off by two years in his estimating that there would be a turnaround in CL Financial's business. He said that contributed to the cash-poor position both Clico and CIB found themselves.

"In a free market economy, there are financial bubbles all the time and we expected the bubble would turn around by 2011," he said.

Duprey said the group's foreign banking partner had trouble accessing credit due to the global economic crisis and that had a ripple effect on the CL group of companies. In addition his energy operations have suffered from plunging methanol and ammonia prices.

The real estate decline has also had a severe impact on CL's real estate subsidiary Home Construction Ltd.

Read the Trinidad Guardian editorial in support of the Government's move