If recent reports are true, that the Government intends to give Clico policyholders 90 cents on the dollar for their 20-year bonds, by topping up the discount rate offered by the banks, my question would be: why not 100 cents? The Cabinet, inclusive of the Minister of Finance, has shown for the first time since the reading of the last budget, its flexibility in trying to settle the policyholders fairly. At 90 cents on the dollar, policyholders still stand to lose tens of thousands. Why should it be an either or scenario?
Here are a few noteworthy points.
1. Settle outside of the courts. Legal battles can be protracted, costly and increases animosity between parties. It would not look good if the Government loses one or all of the cases. This would make settling the debt even costlier. One judgment is already in favour of the policyholders; another case is before the court and others are soon to be filed.
2. Shares should make up the other ten cents. These can be sold, if necessary, thereby restoring 100 per cent of policyholders' cash. No "haircut" necessary.
Passing legislation for bonds, printing 20-bond certificates for each of 15,000 policyholders is, in itself, an unnecessary logistical nightmare, not to mention, time-consuming. Policyholders have already gone almost one full year without any payments. The Minister of Finance should instead invite the commercial banks to purchase the entire block of bonds, spread out over 20 years, in order to raise the necessary capital. This would be faster and easier. Whatever shortfall due to discount rate, the Government can inject the necessary capital to make up 100 cents on the dollar rather than 90 cents. In so doing, all legal matters before the courts will come to an end.
Further, if 90 cents is adhered to, it means that an additional $1 billion of policyholders' funds would be transferred to the banks as profit. Why would the Cabinet want to add to the banks' profit even as they already stand to make approximately $3.5 billion, with a projected rate of 65 cents per dollar. A solution is in sight.I therefore urge the Government to go the extra mile in the interest of bringing closure to this very difficult situation.
Andy Jangeesingh
Via e-mail
