I am not sure why but in the last week, every time I think of the Clico matter, my thoughts end up with the Caribbean Airlines (CAL) board and the difficulties that the line minister, Jack Warner, has had in attempting to discipline a certain director of the airline who seems to be untouchable. Is this column alone in coming to the conclusion that the Clico matter is about to get very messy and, as a result of the vested interests that are likely to be at play in the Cabinet led by Prime Minister Kamla Persad-Bissessar, the concerns of the 250,000 people who hold policies from the insurance company may get pushed aside?
The vested interests referred to above relates to the Government's exit strategy from Clico, which was first hinted at in this space three weeks ago. This column is aware of three sets of interests that are actively lobbying to influence the Government's position relative to the recovery of the $7.2 billion that the State ploughed into the insurance company's parent, CL Financial, to prevent the collapse of T&T's financial system following the events of January 30, 2009:
• There are those who believe that the Government should accept the highest offer possible for CL Financial's assets in a way that will maximize the State's return in the short term, thereby ensuring that the Government is able to balance its books at a time of economic uncertainty.
If the Government accepts this position, which can be described as a foreign resolution strategy, it is quite likely that some foreign company will take control of MHTL, Republic Bank, the largest rum producers in the Caribbean and Home Construction Ltd, which is the country's largest landowner apart from the State;
• There are those who believe that the Government and people of this country have the intelligence, the management capacity and the capital to provide stewardship over the assets of CL Financial in a way that would secure the country's long-term future.
Those who hold this position believe that MHTL, 56.4 per cent of which is owned by Clico, is central to a new industrial revolution in T&T that focuses on the manufacture of valuable products that go far downstream of methanol and ammonia into the production of goods that are in everyday use. Those who hold this position, which is the national resolution strategy, have a vision of Republic Bank, or its subsidiary, taking on the role as the financier of choice for this new industrial revolution. They have a vision of new, locally owned companies being established or spun off that would take charge of the construction of the plants, the manufacturing of the downstream products, the transportation of those products to markets near and far, the insurance of the plants and the locally owned ships and the marketing of the products globally.
Most importantly, they have a vision of the companies that comprise this new industrial revolution being listed on the local stock exchange and being owned in part by nationals of T&T, local pension plans and insurance companies, mutual funds such as the Unit Trust Corporation and an institution like the National Insurance Board. They also have a vision of a merger between Angostura and Lascelles deMercado, which could be one of the premier rum producing companies in the world.
It should go without saying that this is the camp that I am in;
• And then there are those who are lobbying for German interests to be allowed to take control of MHTL, which with the proper management and stewardship is likely to turn out to be the single most valuable asset every created or "discovered" in the history of the Caribbean.
This group, of which former CL Financial chairman Lawrence Duprey is a member, as his full-page advertisement in the Tuesday Guardian indicates, is being advised by a law firm with close ties to the ruling coalition. It is also being advised by an advertising agency with even closer ties to the ruling coalition. I am reliably informed that this group, as recently as last July, placed a value of $2.5 billion on MHTL, whose 166,988,249 shares were valued at $4.5 billion on Clico's balance sheet in the 2007 annual report. Given the heavyweights that are lobbying on behalf of this group, one would not be surprised if they eventually end up with the ultimate prize of dominion over MHTL. With what consequences for the Clico policyholders, one wonders? And who is representing the interests of the Clico policyholders around the Cabinet table?
But the news on Clico is not all bad. In recent weeks, there has been a significant increase in the value of two of the local publicly listed shares in which Clico has a large minority shareholding. From what my research has been able to unveil, the share price of Angostura has jumped by 80 per cent from the beginning of April to Tuesday, May 10. In the space of 40 days, then, Angostura's share price has gone from $5 a share to $9 a share. Clico owns 66,971,877 Angostura shares, which is equal to 32.4 per cent of the rum and bitters manufacturer. Clico's stake in Angostura was worth $334.5 million on April 1 and $602 million on May 10.
With CL Financial owning an additional 92.5 million shares in Angostura, through a holding company called Rumpro, Clico and CL Financial together own a total of 159.4 million shares, bringing their combined stake in Angostura to 77.4 per cent. This means that the total combined value of the Clico and CL Financial ownership position in Angostura on Tuesday was $1.43 million and the company had a market capitalisation of $1.85 billion. Also, on Friday, Republic Bank moved to $85 a share. Clico owns 32.4 per cent of Republic Bank, which amounts to 51.84 million shares. This means that Clico's 32.4 per cent stake in Republic Bank is currently worth $4.4 billion.
Last week, the Republic Bank Group recorded a net profit attributable to shareholders of TT$525.3 million for the financial half-year ended March 31, 2011. This represented a 14 per cent increase over the corresponding period last year. Republic Bank Chairman, Ronald FdeC Harford, in announcing the Group's half-year results said, "Over the six month period October 2010 to March 2011, the business environment continued to be characterised by high levels of liquidity, low interest rates and lackluster loan demand." "Against this backdrop, the Group has achieved a very satisfactory profit attributable to shareholders of TT$525.3 million for the half-year ended March 2011.
The main drivers for our improved performance have been our effective treasury management, our focused approach to the control of operating expenses, and the quality of our loan and investment portfolios," he added. Total assets now stand at $46.3 billion, up five per cent on the prior year. The bank's Board of Directors has declared a half-year dividend of $1.25 (2010:$1.15) to be paid on May 27, 2011, which means that Clico's coffers are going to receive a cheque for $64.8 million towards the end of this month.
e-mail anthony.wilson@guardian.co.tt