As the May 31, 2013, expiry date for the extension of the Government of T&T/CL Financial (CLF) shareholders agreement approaches, I wish to revisit the serious call by the Guardian in its February 2 editorial, for the Minister of Finance Mr Larry Howai to give full details on the $19 billion government bailout of Clico and British American Insurance Company (Trinidad).
Readers may recall the piece was precipitated by the Finance Minister's statement in Parliament that "issues relating to inter-company transactions and inter-company liabilities had not been addressed as part of the process of disbursing the bailout funding" and, as a consequence, the Government may not be able to recover all of the funds advanced in the bailout.
In fact, only last Sunday in another newspaper, the minister is quoted as saying "the Government is considering as one of its options acquiring the shares of CLF" in a bid to recoup the billions of dollars invested to save Clico. Interestingly if this report is accurate and if such a transaction were to be effected, what this means is the Government would not only be acquiring CLF, the holding company, but also its subsidiary, one of which is publicly-listed company, Angostura Holdings Ltd (AHL).
Clearly, the timing and opacity of these revelations must be of concern to many of us given their far-reaching implications. Accordingly, I propose to share some thoughts with you today, not necessarily from the perspective of a taxpayer or a former Clico policyholder, but more particularly as someone who has been and still is a longstanding advocate for the rights of minority shareholders.
One would recall that in late 2010–almost a year-and-a-half after it became due and much to the chagrin of shareholders AHL–a CLF publicly-listed subsidiary eventually published its 2008 audited financial statements and declared a $1.28 billion loss for the financial year. Undoubtedly, the largest loss incurred by any publicly-listed company in the history of T&T Stock Exchange (TTSE).
The accompanying chairman's report stated quite categorically that the financial statements were "materially impacted by post-year-end events involving CL Financial" and that the "precarious" financial position of its parent "impaired the collectability of circa $1.185 billion in receivables from the CL Financial Group."
The report further stated that recognising these provisions resulted in a net loss of $1.28 billion as well as accumulated losses of $307 million and negative shareholders' equity of $121 million. The company also reported that because of its loss in 2008, it was not in a position to declare any dividends for that year and that "these well documented financial challenges which confronted CL Financial placed Angostura Holdings in an extremely difficult position."
One would also recall that the major concern at the time was that the company's auditors, PwC, found it necessary to issue a disclaimer of opinion, which stated that "we (PwC) have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the consolidated financial statements."
It is now a matter of history that PwC was subsequently replaced by Ernst and Young.
In fact, one would also recall the prelude to this was a notice to shareholders dated June 26, 2009, in which the company stated, inter alia, that "in view of the significance of the inter-company transactions between Angostura and its parent company, CL Financial (CLF) and other related matters, our auditors, PwC, are yet to complete the audit of the company's financial statements for the for 2008.
"Of major concern is a receivable from CLF in the amount of $633 million arising out of previous sale and transfer of assets from Angostura to CLF, for which payments have not yet been made."
Preliminary research indicates this statement is a direct reference to the Lascelles de Mercado (LAS) acquisition in 2008, in which LAS shares that were purchased by Angostura and transferred to CLF without any payment being made.
It therefore seems to me that the recent statements of current Finance Minister (and to his credit) is, in part, an acknowledgement that the Government as a creditor of CLF cannot on the one hand legitimately seek to recover $19 billion of unsecured debt which it is owed by the Group, whilst at the same time, refuse to pay other (secured and unsecured) creditors.
This is so particularly in circumstances where:
(1) CLF is not in liquidation but operating as a going concern,
(2) one of its other creditors, AHL (as previously mentioned) is a company listed on the TTSE in which 47 million or 22 per cent of its shares are owned by the public and whose interests the Government has a duty to protect; and
(3) the Government entered into a formal agreement with CLF on June 12, 2009, which gave it management control of the Group and mandates the board to restructure its (CLF's) debts to ensure they are properly satisfied and also that the parent company and subsidiaries are placed on a proper and sustainable path to achieve growth and value optimisation.
In light of the above, I am persuaded that the Government will have to revisit the $1.28 billion AHL write-off for to do otherwise would mean the Government is attempting to subordinate the interests of the AHL minority shareholders to those of the majority shareholder, CLF and, by extension, itself.
This point is underscored by the fact that notwithstanding the recent sale of LAS shares by CLF to Campari for approximately US$338 million or $2.17 billion, it is my understanding that AHL has still not been paid. Such a scenario not only places the Government in an invidious position, but I am advised it also provides the company's minority shareholders with more than sufficient grounds, to mount a substantial legal challenge pursuant to section 242 of Companies Act Chapter 81:01, under the rubric "Restraining Oppression."
I therefore trust that the minister will take or cause to be taken the necessary action to address this unsatisfactory state of affairs as soon as possible.
Peter Permell
ppermell@yahoo.com
