On Jan­u­ary 2, 2023, the Cli­co In­vest­ment Fund will be ter­mi­nat­ed.

The CLI­CO Trust Cor­po­ra­tion Lim­it­ed post­ed a no­tice to the T&T Stock Ex­change on De­cem­ber 14, where it ad­vised unithold­ers that the last trad­ing day for units in the Fund will be De­cem­ber 30, 2022, and the Record Date for dis­tri­b­u­tion of the Fund as­sets will be Jan­u­ary 5, 2023.

As the days count down to the end of the Fund’s life­time, the man who was cru­cial to the fund’s cre­ation; David Du­lal-White­way has hailed it as a suc­cess par­tic­u­lar­ly giv­en the bal­anc­ing act he had been tasked with at the time fol­low­ing CL Fi­nan­cial’s col­lapse.

“I think it’s im­por­tant to go back, be­cause this is 2011 and these are the is­sues be­ing faced. And I said, ‘How do you cre­ate some­thing that could rep­re­sent a win-win for the three ma­jor play­ers; pol­i­cy­hold­ers, gov­ern­ment and Re­pub­lic Bank.’ I mean, so that was the ob­jec­tive to get a win-win for all three like I said, if I sit back now and look at it af­ter 10 years I think we achieved what we went out to do,” said Du­lal-White­way, re­fer­ring to the equa­tion he had been asked to solve in the wake of the col­lapse of CL Fi­nan­cial and the sub­se­quent gov­ern­ment bailout which left the Gov­ern­ment in pos­ses­sion of much of Cli­co’s as­sets, in­clud­ing a 51 per cent stake in Re­pub­lic Bank via a 26 per cent stake held by Cli­co the In­sur­ance Com­pa­ny and a com­bined 25 per cent from CL Fi­nan­cial’s var­i­ous sub­sidiaries.

The gov­ern­ment pre­pared to of­fer ag­griev­ed pol­i­cy­hold­ers an ap­prox­i­mate $10 bil­lion worth of ze­ro-coupon bonds to the Cli­co pol­i­cy­hold­ers left in lim­bo but Du­lal-White­way felt an al­ter­na­tive could be found.

“At that time 2011 Re­pub­lic Bank shares were about $93. So to­tal mar­ket cap­i­tal­i­sa­tion Re­pub­lic’s to­tal val­ue is about $15 bil­lion and there­fore Cli­co’s 51 per cent. was worth about $7.6 bil­lion,” said Du­lal-White­way, “The Gov­ern­ment al­so as part of the bailout is­sued about $10 bil­lion worth of ze­ro-coupon bonds to for­mer pol­i­cy­hold­ers of Cli­co.”

He ex­plained while the ze­ro bonds would of­fer some lev­el of pay­out to Pol­i­cy work­ers, it ul­ti­mate­ly would not gen­er­ate any new in­come for those pol­i­cy­hold­ers who had been bank­ing on the in­ter­est gen­er­at­ed by their Cli­co in­vest­ments pre­vi­ous­ly.

“They have the ze­ro-coupon bonds, which are go­ing to ma­ture be­tween 11 to 20 years, but a ze­ro-coupon bond doesn’t pay any in­ter­est. It’s ze­ro in­ter­est and on­ly in ma­tu­ri­ty do you get pro­ceeds from the bond. As you may know, a lot of these pol­i­cy­hold­ers are de­pend­ing heav­i­ly on the in­ter­est in­come they were earn­ing from Cli­co be­cause Cli­co might have been pay­ing them eight per cent or nine per cent, etc. And es­pe­cial­ly for the more el­der­ly ones, that is the source of a ma­jor source for them to sup­ple­ment their pen­sion in­come, etc,” he ex­plained that if pol­i­cy­hold­ers sought to cash in on the coupons, they would stand to lose on their in­vest­ment.

“If they want­ed to cash in the bonds, you could have gone to one of the banks cash it in, but be­cause there were ze­ro coupon bonds and the length of the bonds on av­er­age, you’re on­ly get­ting 50 cents on the dol­lar,” he said.

The Re­pub­lic shares served up an­oth­er con­cern that the Gov­ern­ment could ei­ther de­cide to utilise its po­si­tion to take own­er­ship of the Bank or in­stead de­cide to re­coup the mon­ey spent on the bailout by sell­ing the bank to a for­eign com­pa­ny.

The lat­ter, Du­lal-White­way ex­plained, was a pos­si­bil­i­ty as there were for­eign com­pa­nies ex­press­ing in­ter­est cre­at­ing un­cer­tain­ty about the Bank’s fu­ture in the lo­cal mar­ket.

How­ev­er, he ap­pealed to then Min­is­ter of Fi­nance Win­ston Dook­er­an to place faith in the lo­cal mar­ket.

“My ar­gu­ment has al­ways been that when a coun­try looks at di­ver­si­fi­ca­tion, there’s a lot of fo­cus on prod­uct di­ver­si­fi­ca­tion, you know, main­ly on the en­er­gy side, but I al­so al­ways made the point that mar­ket di­ver­si­fi­ca­tion is al­so an im­por­tant el­e­ment. And as a coun­try, we should re­al­ly en­cour­age and sup­port lo­cal com­pa­nies who are will­ing to go out­side be­cause any of these sur­plus­es they earn from out­side will come back in­to Trinidad and help with the for­eign ex­change,” he said, “I used my ar­gu­ment about di­ver­si­fi­ca­tion, the need to sup­port lo­cal, com­pa­nies who can go out­side. I think that got favoured at the end of the day.”

This al­lowed him to pitch his idea to utilise the Re­pub­lic shares as a ba­sis for what would be­come the Cli­co In­vest­ment Fund, which was set up as a means to sat­is­fy the gov­ern­ment which still need­ed to be re­paid for the bailout, en­sur­ing sta­bil­i­ty and con­fi­dence around Re­pub­lic’s own­er­ship while en­sur­ing pol­i­cy­hold­ers could find some lev­el of re­turn on in­vest­ment.

“I was look­ing at all the play­ers who might be pol­i­cy­hold­ers who had ze­ro-coupon bonds. One is if you need cash, that’s the oth­er thing. We were say­ing then that the fund must be trad­ed on the Stock Ex­change and the rea­son for that is that if some­body didn’t want to wait on the in­vest­ment, they had a way in which they could ex­it at 100 cents on the dol­lar. Be­cause you could have gone in­to the ex­change and trad­ed the shares. If they want­ed to ex­it with ze­ro coupon bonds, they on­ly gained 50 cents on the dol­lar. If we went through this route, there is a pos­si­bil­i­ty of get­ting 100 cents on the dol­lar,” said Du­lal-White­way, who would lat­er reach out to the chair­man of the Cli­co Pol­i­cy­hold­ers group Pe­ter Per­me­ll to en­cour­age pol­i­cy­hold­ers to choose the fund when it was start­ed. How­ev­er, the Gov­ern­ment did not al­low the fund of the en­tire 51 per cent stake of the Re­pub­lic shares it had ab­sorbed from Cli­co.

“If you do the swap, the gov­ern­ment will re­tire those ze­ro-coupon bonds and there­fore re­duce its in­debt­ed­ness right be­cause they no longer have ze­ro coupon bonds out­stand­ing. And from a Re­pub­lic per­spec­tive, we will re­main lo­cal­ly owned we have set­tled our whole 51 per cent share­hold­ing and we have brought in a whole new gamut of I would say share­hold­ers who will then ben­e­fit from the fu­ture growth of Re­pub­lic Bank. So this struc­ture I felt cre­at­ed as a win-win for every­one,” he said, “ While I was aim­ing for the whole 51 per cent I was told that Cli­co’s 26 per cent from the in­sur­ance com­pa­ny could not be part of this struc­ture be­cause with the ad­min­is­tra­tor be­ing in­side of Cli­co, it de­pend­ed on cash flow to start deal­ing with the clin­i­cal in­debt­ed­ness. The nor­mal cur­rent in­debt­ed­ness, not the pol­i­cy­hold­ers and the cash flow from Re­pub­lic which they re­ceive from the div­i­dends. was crit­i­cal for that ad­min­is­tra­tion to con­tin­ue.”

De­spite that ad­just­ment, Du­lal-White­way felt the terms were still favourable and urged all those who in­vest­ed in the fund to see it out to the very end.

“I’m a bit con­cerned about a cou­ple of things. One is that I see up the last week peo­ple are still sell­ing their units in the CIF and they’re sell­ing these units for like $28 on the Stock Ex­change. When if they hold on un­til next month when every­thing stops they will get $30,” said Du­lal-White­way who al­so not­ed that fol­low­ing the ter­mi­na­tion of the fund, in­vestors would still have own­er­ship of Re­pub­lic Bank shares, which could be a use­ful as­set es­pe­cial­ly giv­en the bank’s po­ten­tial for growth.

He ad­vised “When you get the Re­pub­lic Bank shares don’t sell them now, be­cause the share price is low­er than what the fu­ture ex­pec­ta­tions are. So hold on for a while and we had the price rise move up there’s no rea­son why the price I should say no fi­nan­cial or eco­nom­ic rea­son why the share price dropped from $141 to $135. So at least you should be at $141,” he said.

How­ev­er even if they chose to sell now, he felt all in­volved would come out with a bet­ter re­turn on in­vest­ment than the sce­nario with the ze­ro-coupon bonds a decade ago. In his words, a win-win was se­cured.