Many were in tears, some were walk­ing out with card­board box­es full with their per­son­al be­long­ings. Oth­ers were ex­chang­ing per­son­al con­tacts and some knew that they would be see­ing each oth­er for the last time. Every­one was in shock, dazed and con­fused.

No, it’s not Petrotrin. That was a scene 10 years ago al­most to the day. On Sep­tem­ber 15, 2008, the fi­nan­cial firm Lehman Broth­ers filed for what is still the largest ever bank­rupt­cy in the US. The col­lapse of Lehman came dur­ing a month of in­tense cri­sis that saw firms like Bear Sterns and Wash­ing­ton Mu­tu­al sub­sumed by oth­er fi­nan­cial en­ti­ties.

In my years of fol­low­ing the lo­cal fi­nan­cial land­scape I of­ten say that our mar­ket is sub­ject­ed to the same rules as larg­er more de­vel­oped mar­kets. Even though we may like to think we are, we are not im­mune to the dic­tates of Mr Mar­ket and will have to dance to his tune. The dif­fer­ence be­tween here and oth­er places is that our ver­sion of the song is slow­er, so much so that our danc­ing seems de­void of mo­tion. Yet if you wait long enough and look close­ly enough over time you will see the move­ments.

It took ef­fec­tive­ly ten years to play out but our Lehman mo­ment is here in the form of the im­pend­ing clo­sure of Petrotrin. At the time fi­nan­cial ser­vices ac­count­ed for 25 per cent of US gross do­mes­tic prod­uct. Lo­cal­ly we know the con­tri­bu­tion of oil and gas to our well-be­ing.

The scene de­scribed in the open­ing para­graph has since a cou­ple of weeks ago been drama­tised in re­al life in the of­fices and fields that falls un­der the Petrotrin flag. In the case of Lehman it hap­pened in one day. Here con­sis­tent with the slow drip Chi­nese wa­ter tor­ture method, the work­ers of Petrotrin may go through their Lehman ex­pe­ri­ence over a pe­ri­od of months. It mat­ters not be­cause the emo­tions are the same.

Back in Sep­tem­ber 2008 oth­er firms had prob­lems. Every­one, in­clud­ing the em­ploy­ees of Lehman knew that there was a prob­lem with their firm go­ing in­to that Sep­tem­ber week­end. Yet they gen­er­al­ly ex­pect­ed that their route would fol­low the same path as oth­er firms that were propped up and al­lowed to be­come part of oth­er more sta­ble en­ti­ties. Hard­ly any­one ex­pect­ed when they left work on Fri­day 12 that they would have spent their last day work­ing at Lehman.

His­to­ry rhymes

Ten years lat­er the movie is show­ing in slow mo­tion. We all knew of the US$850 mil­lion bond tak­en out in 2009 with a bul­let (full lump sum) pay­ment at ma­tu­ri­ty. We all knew the col­lapse of oil prices in 2014 - 2015 would make this a dif­fi­cult sit­u­a­tion. We all knew that in the af­ter­math of the col­lapse of oil prices al­most every oth­er oil com­pa­ny in the world re­viewed its cost struc­ture in or­der to stay rel­e­vant and if we didn’t im­me­di­ate­ly know that, well I point­ed it out here many times. We all knew the ma­tu­ri­ty date for the bond is Au­gust 2019, we all knew the clock was tick­ing and some­thing had to be done.

In this slow mo­tion movie every­one felt things would just work it­self out but in­stead the clock was run down. Time has run out.

The more you read the script the more you re­alise how his­to­ry rhymes. The more you re­alise that the same mis­takes are made over and over.

Few will re­call that in the week/weeks pri­or to Lehman fil­ing for bank­rupt­cy there was an of­fer from the Ko­re­an De­vel­op­ment Bank to take an eq­ui­ty po­si­tion in the com­pa­ny. Lehman could have been saved but the deal fell through be­cause what turned out to be a com­pa­ny head­ing for bank­rupt­cy could not agree on a price for the com­pa­ny’s shares.

See the sim­i­lar­i­ties be­tween the Gov­ern­ment of the Re­pub­lic of T&T act­ing through the Board of Petrotrin and the com­pa­ny’s union. Obliv­i­ous to the re­al­i­ties they end­ed up agree­ing to dis­agree. One felt it would not have been al­lowed to fail, the oth­er that there was no choice but to let the close down the cur­rent in­car­na­tion and so what took a few days in the case of Lehman will be set­tled over the next few months here in T&T.

In the case of the Glob­al Fi­nan­cial Cri­sis the sto­ries be­gan to be told a year be­fore when a hedge fund run by Bear Stearns and prod­ucts of­fered by the French bank BNP Paribas ex­pe­ri­enced liq­uid­i­ty chal­lenges. No one lis­tened to the ca­nary in the coal mine. Here at home the col­lapse of oil prices gen­er­at­ed lots of talk in the form of ad­dress­es, com­mit­tees and meet­ings but there is lit­tle to show in terms of tan­gi­ble ac­tions tak­en to avert or ma­te­ri­al­ly change the Petrotrin course.

The first is­sue now is to deal with the law of un­in­tend­ed con­se­quences. In the con­text of our slow mo­tion dance rou­tine this is a sud­den stop. When your car sud­den­ly stops things get thrown around and peo­ple some­times get hurt. The stop that we are ex­pe­ri­enc­ing here can sig­nif­i­cant­ly im­pact em­ploy­ment, trade and in­vest­ment and this need to be mit­i­gat­ed.

The plans that we are see­ing com­ing for­ward are not shov­el ready and the gap rep­re­sents a vac­u­um of eco­nom­ic ac­tiv­i­ty. My knowl­edge of physics tells me that na­ture ab­hors a vac­u­um and if what is to re­place is not prop­er­ly man­aged this vac­u­um will be filled by many dif­fer­ent (un­con­trolled) sce­nar­ios.

Lessons

The af­fect­ed work­ers and, in fact, all cit­i­zens need to al­so take lessons from these two events ten years apart. I will of­fer three for your con­sid­er­a­tion. Each one is worth a sep­a­rate col­umn but they are be­ing in­tro­duced here for the time be­ing.

1 The first les­son is to un­der­stand lever­age. Petrotrin bor­rowed to fund var­i­ous projects. Those projects were large­ly un­suc­cess­ful but the debt needs to be re­paid re­gard­less. Petrotrin bor­rowed US$850 mil­lion just eight months af­ter CL Fi­nan­cial failed and when the ef­fects of the glob­al fi­nan­cial cri­sis was still rel­e­vant and glob­al de­mand had fall­en sig­nif­i­cant­ly. More im­por­tant­ly that bond came in Au­gust 2009 and both S&P and Moodys, in Ju­ly, had just low­ered Petrotrin’s cred­it rat­ing.

As a con­se­quence the in­ter­est rate at which the bond was se­cured was ab­nor­mal­ly high. The “make whole” pro­vi­sions of the bond made that clear. The arrangers for the bond, Cred­it Su­isse and JP Mor­gan, had an in­vestor friend­ly pro­vi­sion where if Petrotrin tried to re­fi­nance the bond at bet­ter terms be­fore the ma­tu­ri­ty date in­vestors had to be “made whole” in that the out­stand­ing in­ter­est pay­ments would have to be paid for the re­main­ing years on the bond. A 9.75 per cent in­ter­est on­ly, bul­let at ma­tu­ri­ty bond with a “make whole” pro­vi­sion is very ex­pen­sive for the is­suer (Petrotrin).

Your les­son here is to know when to bor­row, know why you are bor­row­ing and un­der­stand the terms and con­di­tions that you are sub­ject­ed to so that if some­thing were to go wrong you would have some wig­gle room to de­vel­op a con­tin­gency plan.

2 The sec­ond les­son is sim­ple and ob­vi­ous but of­ten times fear makes us do oth­er­wise. The les­son, don’t pro­cras­ti­nate with your fi­nan­cial af­fairs. If you have a debt, lets say a mort­gage and you run in­to fi­nan­cial dif­fi­cul­ties then the longer you wait to ad­dress those is­sues with the lender the less flex­i­bil­i­ty you will have. If you wait too long you could end up los­ing your house. That’s what is play­ing out here with Petrotrin. The quick­er you de­cide to deal with a fi­nan­cial chal­lenge the more op­tions you would tend to have.

3 The third les­son is man­age your risks or put an­oth­er way nev­er put your eggs in one bas­ket. When Lehman failed the work­ers lost their salaries, their pen­sions, their stock op­tions and some their life sav­ings. Their wealth was too con­cen­trat­ed in the com­pa­ny that they worked for. Petrotrin em­ploy­ees may ex­pe­ri­ence some­thing sim­i­lar. Their salary, ben­e­fits, sav­ings, health care and even their chil­dren’s school­ing is in­te­grat­ed with the com­pa­ny.

If ben­e­fits such as these are made avail­able to you, don’t refuse them. But al­so don’t take them for grant­ed. Sep­a­rate your earn­ings from your sav­ings. Es­tab­lish a mar­ket rate for your health care and oth­er ben­e­fits and set aside an amount to cater to a time if those ben­e­fits are not avail­able. That will al­low you to bet­ter main­tain your lifestyle re­gard­less of the job you are in. Life can change and you have to give your­self a mech­a­nism to cope.

Learn from the lessons of the past to have a more sta­ble fu­ture.

Ian Nar­ine can be con­tact­ed
via the web­site - ian­nar­ine.com