Now that the December 14th 2012 close for acceptance of the much anticipated CLICO Investment Fund (CIF) offer has passed, unitholders are anxious to find out how the Fund performs on its first trading day today. While we all await trading outcomes, we will now address the results of acceptance of the offer, lay out the options available for unit holders and outline the process for those still seeking to convert their bonds to units in the over the counter (OTC) market.
Bondholders would recall that the government's offer to the Short Term Investment Products (STIPs) holders with policies valued over $75,000, entailed receiving an initial lump sum of about $75,000 in cash and the remainder of the policy value in zero-coupon bonds with annual maturities over 20 years. Of the Total STIPS holders, 91 per cent or 14,236 persons accepted this initial offer. (Exhibit 1)
The most recent government offer to CLICO bondholders entailed the exchange of their 11-20 year bonds for units in the CIF at a conversion rate of 40 units for every $1,000 in bonds. The CIF is set up as a closed-end mutual fund which is tradable on the Trinidad and Tobago Stock Exchange (TTSE) at an opening Net Asset Value (NAV) of $25 per unit. The Fund is capitalised with an asset value of $5.10 billion (204 million units at the NAV of $25 per unit), consisting of deposited property of shares of Republic Bank Limited and government securities with a coupon of 4.25 per cent for a term of 25 years.
The Fund's NAV will vary (either increase or decrease) according to the underlying value of the deposited property. The Fund will trade on Exchange as any other listed security, where the interaction of demand and supply causes adjustments in the market price. Therefore, unitholders will receive value at market price, not NAV, for units sold on the TTSE.
CIF Offer Outcome
Of the 14,236 bondholders, 92 per cent or 13,070 were residents of Trinidad and Tobago and therefore automatically eligible to accept the offer. Of these eligible bondholders, 50 per cent or 6,582 persons accepted the offer to exchange their bonds for units in the CIF. Exhibit 2 shows that out of all 14,236 resident and non-resident bondholders, the 6,582 persons who accepted accounted for 46 per cent.
In terms of value, the picture is a bit different. Exhibit 3 shows that the 13,070 residents held $4.1 billion or 80 per cent of the value of the 11-20 bonds. Publicly available information shows that the value transacted by one of the major players of the banks and brokerage houses that facilitated the conversion is approximately $1.5 billion or 29 per cent of the total value of bonds available for exchange. Our information states that, altogether, banks and brokerage houses converted $3.2 billion or 82 per cent. Consequently, there is $0.9 billion of bonds that have not yet been converted.
The bond values can be further broken down into number of units. The CIF prospectus states that the Fund will comprise 204 million in units. At a conversion rate of 40 units per $1,000 in bonds, the $3.2 billion in bonds amounts to approximately 129 million units having been subscribed for. Therefore, the Fund is being listed today with approximately 63 per cent in subscribed unitholders (Exhibit 4). The unsubscribed units are held by the government and available for conversion in the OTC market.
Bondholders who still wish to convert their bonds to units can do so in the over-the-counter (OTC) market at the same conversion rate. As before, partial trades are not permitted and therefore interested bondholders must trade all their 11-20 bonds for units.
Bondholders are required to obtain a Trinidad and Tobago Central Depositary (TTCD) account from a registered broker. In addition, a Bond Transfer Form and Purchase Notification Form must be completed. The applicable fee is $345 per transaction, comprising broker commission of $300 and a TTCD transfer fee of $45.
Progress for Non-Resident Bondholders
For legal reasons, non-resident bondholders were not entitled to the offer of exchanging their bonds for units of the CIF. Our information shows that non-resident bondholders reside across 37 different jurisdictions, with the majority being residents of the United States, United Kingdom and Canada. As at the date of writing, only the jurisdictions of Guyana and the Cayman Islands have been officially approved. Therefore, residents from Guyana and the Cayman Islands are now eligible to accept the offer.
Non-resident bondholders who reside in a jurisdiction that has not yet been approved cannot exchange their 11-20 bonds in the over-the-counter trades unless otherwise advised by the appropriate authorities. These persons are invited to contact any broker in Trinidad and Tobago to seek information on the status of approval for the jurisdiction in which they reside.
Options Available to Unitholders
Effective today January 7th 2013, CIF will commence trading on the TTSE. The units of the Fund will be listed at an initial price of $25.00. Unitholders can now either sell or transfer their units via a broker at their own expense (broker commissions and TTSE fees applicable). Units can only be traded on the TTSE.
Unitholders who do not wish to sell their units immediately will be entitiled to distributions on February 21 and August 21 of each year. For Unitholders to be entitled to the Fund's first distribution on February 21st 2013, the Unitholder's name must be on the Register of Unitholders of the Fund by the Fund Record date which is January 28th 2013.
Unitholders can contact their broker for further information.
—This report is for informational purposes only and does not constitute an offer or solicitation to buy or sell any mutual funds or securities discussed herein. The information and any data contained herein have been obtained from financial data provided to us by the issuers of the subject mutual funds or securities. Investors wishing to purchase any of the mutual funds or securities mentioned should consult an investment advisor. Projections and estimates are those of Bourse Securities based on current available information.
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