Tuesday, February 28, 2017

'Rebirth' of Duprey

Divestment plan for Govt to exit CL Financial in 5 months, giving ex-chairman possible control...

On his way: Former chairman of collapsed CL Financial Lawrence Duprey gestures as he walks past our cameraman outside the Hyatt Regency (Trinidad) Hotel in Wrightson Road, Port of Spain, two Fridays ago. Duprey, who has been living in Florida, USA, for several years and remains CL Financial's majority shareholder, has travelled to Trinidad at least twice in the past few months to hold discussions on CL and its subsidiaries with several parties. —Photo: CURTIS CHASE

A perfect storm

The revelations at the CLICO commis­sion were startling—million dollar salaries paid to executives, companies created by executives and hiving off millions in contracts and blatant breaches in governance—all at the expense of policyholders.


CLICO was an insurance company formed by Cyril Duprey in 1936.


The reins were subsequently passed on to his nephew Lawrence in 1988 who grew the company into CLF.


When former Central Bank Gover­nor Ewart Williams announced the bailout of the company, he said it was to reduce the “systemic risks” to the country's financial sector.


Today, Duprey's CLF is a shell of what it once was—several assets were sold for a cumulative $5.5 billion.


They were Primera Energy, Lascelles De Mercado, Burn Stewart Distillers, Valpark Shopping Plaza and Atlantic Plaza, its MHTL shareholding and its W Fort Lauderdale Hotel.


The majority of Government's bailout was spent on paying back policyholders of CLICO and British American's executive flexible premium annuity (EFPA), which was a facility created by CLICO to raise money and bore an above-market annual interest rate of ten per cent.


Those interest rates had attracted over 25,000 people to invest billions.


Duprey had described his empire, which at one time comprised some 65 companies in 32 countries, as being caught up in a perfect storm of economic collapse.


AFTER eight years, a commission of enquiry, civil action by the Central Bank and an active police investigation, former chairman of CL Financial (CLF) Lawrence Duprey could regain control because he remains the main shareholder of the once-mighty conglo­merate.

That is if the Government follows the plan titled “Project Rebirth” prepared by auditor Price­waterhouseCoopers (PwC).

The plan paves the way for Government to exit CLF in five months, with the balance of $19.34 billion owed to it for the 2009 bailout.

The $19.34 billion payment will comprise 92 per cent cash and eight per cent real estate.

“Under the divestment plan, the Government receives within 150 days, $13.99 billion from the restructuring of CLICO, which comprises cash of $12.170 billion and real estate of $1,827 million,” the plan said.

The cash component of US$589 million will come from the sale of Methanol Holdings International Ltd (which should raise $2,507 million (US$369 million), CLF cash in CL World Brands of $182 million (US$27 million) and CLICO cash of $1,307 million (US$192 million).

The real estate component will consist of lands which Government requires for its infrastructure development plans.

The real estate up for divestment are Oceanic/Occidental land in Tobago for $867 million and HCL's Buccoo Lands for $960 million.

The plan, dated December 12, 2016, was presented to the CLF board last month.

It noted since 2009, the Government and related entities injected $22.4 billion into the CL Group—into Colonial Life Insurance Company (CLICO), British American (BAT), CMMB and Clico Investment Bank (CIB)—to mitigate risk.

CLICO remains under management by the Central Bank.

In March 2015, Central Bank Go­vernor Jwala Rambarran announced that CLICO had turned a profit and was able to satisfy its main creditor—the Government—with a $7 billion payment.

However, only $4.9 billion was paid.

The Sunday Express understands however that CLF wants to hold on to Angostura.

CLF is chaired by former Inde­pendent senator Dr Rolph Balgobin.

 

The plan

 

The Sunday Express obtained a copy of the plan which shows that PwC proposed a due diligence period of 30 days and a transaction period of 120 days, with interim payments being made until the sum is fully repaid.

That plan, which proposed that assets of CLF and two of its subsidiary companies—CLICO and CIB—be divested, remained with the CLF board for over a month before it was handed over to Finance Minister Colm Imbert, the Sunday Express was told.

He did not immediately respond to requests for comment yesterday.

PwC had projected that the exit plan should begin execution in January to meet the May deadline.

The plan comprises three major steps:

1. The restructuring/stabilisation of CLICO

2. The phased liquidation of CIB that commences with the sale of its marketable securities held

3. The transfer of CLF cash and HCL lands to the Government to make up the shortfall.

“Post-transaction execution CLICO is projected to have positive shareholders equity of $3.091 billi­on, a surplus on its Statutory Fund and sustained after-operating and after-tax profits,” the plan read.

“The nuclear option (forced liqui­dation of CLF Group) is estima­ted to lead to the destruction of stakeholder value in the order $7.9 billion, plus the inevitable legal, accounting and other advisory fees, and would take several years to be fully resolved,” it said.

PwC noted CLICO has a deposit of $4.4 billion before interest due from CIB, as well as a repurchase agreement of $1.7 billion with CIB.

PwC expects CIB to meet at least 70 per cent of the agreement.

“Given this interdependence, we recommend that the restructuring and or liquidation of the respective entities be carried out in a co-ordi­na­­- ­­ted and holistic fashion whilst ensur­ing full compliance with the Companies Act and the Act of Parliament, which appointed the CIB liquidator.

“Also, in order to advance the interests of all stakeholders, all reasonable steps should be taken to secure the 'block' sale of the 50 per cent Republic Bank Ltd (RBL) shares that are collectively held by CLICO, CIB and the Clico Investment Fund (CIF) to secure the premium that would arise from such a sale,” the plan said.

The sale of RBL shares is expected to earn $1,992 million.

 

Duprey fights back

 

Since 2015, Duprey has wanted his company back as he believed he was duped into disposing CLF to the Government in January 2009.

The Sunday Express learnt that Du­prey, who has visited Trinidad from his home in Florida Miami, USA, at least twice recently, has held meetings with the CLF board on the matter.

Duprey, 82, remains the main shareholder of CLF.

“The company is easy to fix. The economy and the country need that company. I have unfinished business to take care of,” he had told the Sunday Express in a 2015 interview.

The Government has been managing the CLF conglomerate through a shareholders' agreement originally signed in June 2009 and which has had multiple extensions as the Government seeks to exit the company.

He has blamed the politics of the day for how he eventually lost control of it.

In his witness statement provi­ded to the commission of enquiry in October 2012, he said: “The global collapse, coinciding with an ever-impossible revamp of the regulatory framework and a refusal of Government-owned entities to back the group after all the years of benefit that they had received from the interest income that the group had generated, led to the need for some ultimate Government support.

“I would have preferred, as I deal with further on in this statement, of the intervention had not been so politically motivated and had been directed at protection, for I believe had that been the position, we would have fared a great deal better. Losing all the intellectual capital as a condition of intervention was a bad decision and was not one replicated in the USA or the UK.

“It is of note, in this regard, that I was firmly of the view in January 2009 that the run on CIB and the resultant liquidity or cash-flow issues was much inspired by the decision of State-owned or run entities ma­king decisions at or about the same time to withdraw rolling deposits which had been previously rolled from maturity to maturity without question. The decision to seek funds back came in reality out of the blue and caused severe problems.”