At an unusual off-the-record briefing on Wednesday, a government official signalled the administration's intention to get former CL Financial chairman, Lawrence Duprey, to renegotiate the June 2009 Shareholders' Agreement. That agreement was reached more than six months after the collapse of Clico and Clico Investment Bank, which had triggered the intervention by the Government and the Central Bank in order to prevent the problems of the insurance company and the non-bank financial institution infecting the country's entire financial system. The purpose of the agreement was to allow the Government to take control of CL Financial's assets in order to: correct the financial condition of Clico, CIB and British American and protect the interest of policyholders of Clico and British American and the third-party depositors of Clico Investment Bank.
The purpose of the agreement was also to ensure that the debts of the CLF group are managed and, as appropriate, satisfied and to cause CL Financial to repay sums expended by the Government "once obligations to policyholders and third-party depositors" have been met. The ethos of the agreement and the Memorandum of Understanding, which was signed between the Government and the CL Financial group on January 30, was to ensure that the people who invested their life savings in the financial institutions of CL Financial were returned to as close to whole as the prevailing conditions allowed. What's more, the Shareholders' Agreement would have been arrived at after long, good-faith negotiations between the Government and CL Financial and, as with most negotiations, neither side would have walked away from the table with everything it wanted.
And while the politicians may have set the policy guidelines for the Government's negotiating team, as with most such exercises in a democracy, the details of the agreement would have been worked out by the public servants and the attorneys. In the context of an agreement arrived at in good faith, it is difficult to conceive why the Government would now be seeking to invite Mr Duprey, the majority shareholder of CL Financial, to renegotiate the agreement just short of half-way through its three-year term. Having entered into a good-faith agreement that allows the Government to dispose of CL Financial assets that were acquired and developed over a 30-year period, does the Government really expect Mr Duprey to renegotiate that agreement because the Government does not feel its position is "strong enough?"
Based on the perusal of the document by this newspaper, nothing prevents the Government from going ahead and selling the assets that are now under its control. Government representatives, for their part, suggest that if the State were to attempt to sell a CL Financial asset without the approval of Mr Duprey he would instruct his legal representatives to take action to block the sale. The Government spokesmen have put this forward without a shred of proof and by pointing to the Shareholders' Agreement that provides no support for their argument. If there is no legal limitation on the Government selling the CL Financial assets, the Government needs to answer what's holding up the sale of CL Financial equity in companies like Republic Bank, Methanol Holdings, Lascelles deMercado and others.
The argument about not wishing to sell because of depressed asset prices is running a little thin, given the sharp rebound in global asset prices in the last 18 months. And the myth about the only way assets can be sold is by a fire sale has been exposed by regular reports of companies controlled by governments, in situations similar to those of CL Financial and Clico, selling assets in a controlled way. It could be that the reason the Government is reluctant to sell any of the CL Financial assets is because it knows that the first call on the profits of such disposal would go to the Clico and British American policyholders. And it is also interesting that the Government has not discussed the valuation of the equity holdings by the CL Financial companies it controls or whether there has been any interest by international and local investors to acquire that equity.