Bideshi back as adviser on CL Financial

Steve Bideshi has been named head of a select committee tasked with advising the new Kamla Persad-Bissesar government on how to clean up the financial mess at CL Financial and insurance group CLICO, which have been under the control of the state for 18 months.

Bideshi, an international banker, ran the CL Financial group for a short period last year, but quit in January when his interim employment contract expired.

The select committee, appointed by new Finance Minister Winston Dookeran, will recommend a preferred solution from a menu of options for the repayment of CLICO's traditional and non-traditional insurance liability products; a financial reorganisation plan for CL Financial that demonstrates financial stability and ensures full satisfaction of commercial bank and intercompany debt, and a clear path and timetable on how the Government will exit its loan capital position and restore public confidence.

Former finance minister Wendell Mottley will also sit on the committee.

Consultants contracted by the Trinidad central bank have concluded that CLICO policyholders can be repaid their principal only over a five-year period, provided there is a further injection of capital.

In addition to this is the challenge of restructuring the company's debt, which has economy-wide inputs that must be addressed, according to Dookeran.

On a group consolidated basis, CL Financial may be technically bankrupt.

Remaining assets

But when CLICO and its subsidiary CLICO Investment Bank (CIB) are stripped from the consolidation, theremaining assets - including spirit companies Angostura and Lascelles de Mercado - exhibit economic viability and appear attractive to global companies, the finance minister added.

Dookeran said the challenge is to ensure that non-key strategic assets have the right management and financial plan to repay bank debt, non-core strategic assets are quickly disposed of andthat CL Financial repays CLICO its outstanding inter-group debt which will assist CLICO in discharging its liabilities.

In January 2009, the central bank intervened in CIB after it fell short of liquidity requirements. Because of the significant intergroup exposure between CLICO and CIB, compounded by maturing short-term liability products sold by CLICOat above-market interest rates, the insurance group was unable to meet maturing policyholder claims.

As a result, Government and CL Financial agreed a rescue deal, resulting in the revocation of CIB's licence and a transfer of third-party liabilities to First Citizens Bank, and secondly an agreement by the Government to finance the statutory deficit at CLICO.

In June 2009, CL Financial and the Government agreed that because of the significant shortfall in statutory assets and Government's willingness to lend CLICO the sums necessary to bridge the gap, CL Financial would appoint a new board with the majority held by Government to exercise propergovernance.

It was also agreed that the assets owned by and managed by CL Financial would provide a source of repayment for the government's loan capital in CLICO, which now stands just below US$1 billion.

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