Republic Financial Holdings Ltd, the holding company for Republic Bank Ltd and many other companies, is the largest, indigenous commercial bank holding entity in the Caribbean.
As at March 31, 2023, the Republic Bank group held total assets of US$16.90 billion (TT$114.1 billion).
As at March 31, 2023, the Republic group’s market capitalisation was US$3.34 billion (TT$22.57 billion), given that it was trading at TT$138 per share on March 31, and its issued share capital was 163,608,883
Republic is also one of the most diversified financial holding companies in the region, as it operates in 14 countries from Cayman Islands and the British Virgin Islands in the north to Guyana and Suriname in the south. It also has operations in the West African state of Ghana.
According to the group’s 2022 annual report, the company’s Cayman Islands operation is now its third largest source of net interest income and after-tax profits after T&T and the Eastern Caribbean.
The financial holding company also remains one of the most profitable companies in the region, as its after-tax profits for the six months ended March 31, 2023 totaled US$128.07 million (TT$864.5 million). The bank’s profits for its 2022 financial year amounted to US$249.33 million (TT$1.68 billion).
With regard to its ownership, as at January 27, 2023, the Government of the Republic of Trinidad and Tobago (GORTT) owned 32.68 per cent of Republic Financial Holdings Ltd, according to a material change notice published by the group on February 1, 2023.
As at January 27, the T&T Government’s shareholding in the Republic Bank group was held 25.97 per cent by the National Investment Fund Holding Company (NIF) and 6.71 per cent by Corporation Sole–the entity into which all assets of the T&T Government are vested and held.
The Minister of Finance, currently MP Colm Imbert, is the T&T Government’s Corporation Sole, according to the Ministry of Finance (Incorporation) Act. NIF is 100 per cent owned by Corporation Sole.
What is NIF?
NIF, which was incorporated in May 2018 by Corporation Sole and issued corporate asset-backed bonds worth $4 billion in August 2018, in three series: Series A—five years, Series B—12 years and Series C—20 years.
Those bonds worth $4 billion were backed by shares that, at the time of issue, were worth $7.93 billion.
NIF was incorporated “for the purpose of holding and monetising assets transferred by GORTT in repayment of the debt due to GORTT by Clico and Clico Investment Bank,” according to the NIF prospectus. Also included among the assets that back the NIF is 100 per cent of Trinidad Generation Unlimited (TGU), a wholly state-owned electricity generation facility located in La Brea.
As such, NIF held the following shares, which were transferred by Clico and Clico Investment Bank to repay debt due to GORTT:
• 42,475,362 shares of RFHL;
• 15, 285,917 shares of One Caribbean;
• ↓61,677,011 shares of Angostura Holdings Ltd; and
• 4,548,712 shares of Witco
Valuation of Corporation Sole’s stake in RFHL
The T&T Government’s 32.68 per cent shareholding in Republic Financial Holdings Ltd makes it the single largest shareholder of the financial holding company.
As at March 31, 2023, when the RFHL stock traded at $138, the T&T Government’s stake in the financial holding group was worth US$1.09 billion (TT$7.37 billion).
On Tuesday, when the financial holding group traded at TT$131.67, the T&T Government’s stake in RFHL was worth about US$1.04 billion (TT$7.03 billion). That is a decline of about 4.5 per cent, and is a new 52-week low for the English-speaking Caribbean’s largest indigenous financial institution. A suggestion that a friend of mine made was that the Government intends to place some or all of its 32.68 per cent shareholding in RFHL in what is being called NIF2.
Speaking in the Senate on May 2, 2023, Minister in the Ministry of Finance, Brian Manning, noted that the Series A of the original NIF bonds, the five-year bond, is due to mature on August 9, 2023.
In the May 4 edition of the Business Guardian, in this space, Mr Manning was quoted as saying: “After this, NIF will launch a Series D bond, using appropriate State assets, which can be considered to be a NIF2 issue. The terms of the Series D NIF bonds will be similar to the original NIF bonds, appropriately adjusted for current market conditions.”
Mr Manning was, at the time, responding to a motion on the adjournment by Opposition Senator Wade Mark.
NIF2 and NIF Series D are one and the same. At a sitting of the Senate in late April, the Minister in the Ministry of Finance raised the possibility that shares in Methanol Holdings International Ltd (MHIL), a holding company for the Oman-based methanol producer, would form part of NIF2. Clico owns MHIL in partnership with Switzerland-based petrochemical giant, Proman.
At the April sitting, Mr Manning disclosed that on January 9, 2023, Government accepted an offer from Clico to acquire 19.63 per cent of its MHIL shares “as part of the reduction of the debt owed to the Government of the Republic of T&T (GORTT).”
He also disclosed that on February 21, 2023, NIF accepted an offer from Clico to acquire 17 per cent of its shares in MHIL.
That means Clico offered to sell a combined total of 36.63 per cent of the shares in MHIL to NIF, which is 100 per cent owned and controlled by Corporation Sole, and to the Government, through Corporation Sole.
By my estimate, the shares that Clico offered to NIF and the Government are worth US$218.34 million ($1.47 billion).
Mr Manning also told the Senate in April: “To date, Clico has signed share-acquisition agreements and share transfer forms with the Government of the Republic of T&T and NIF, but the share register of MHIL has not yet been amended to reflect the transfers.”
The obvious interpretation of Mr Manning’s comment that “the share register of MHIL has not yet been amended to reflect the transfers,” is that there is a legal dispute between Clico and Proman over the amendment of the MHIL share register to reflect the transfer of shares to NIF and the Government.
If there is a legal dispute–and neither Clico nor Proman has said there is a legal dispute, to be fair–where does that leave the Government’s 32.68 per cent stake in the Republic Bank group, assuming that the Government does plan to make the Republic Bank group part of NIF2?
It leaves the whole issue of NIF2 in abeyance until the MHIL share register can be amended to reflect the transfer of shares to NIF and the Government. That could take days or years, depending on whether Proman decides to take the issue of the disposition of Clico’s shares in MHIL to arbitration.
But the point needs to be made, once again unfortunately, that the T&T Government’s 32.68 per cent shareholding in the Republic Bank group would normally trigger T&T’s Take-Over Byelaws. And the Trinidad and Tobago Securities and Exchange Commission still has not responded substantively to my query on this issue first made on February 1, 2023.
If the Government plans to make some or all of its shareholding in the Republic Bank group part of NIF2, also called Series D, can’t the Minister of Finance just come out and say so?