The Government has one week to decide on the proposals presented last week by the Clico Policyholders Group (CPG) to resolve the issue concerning Clico investors. The deadline was given at a CPG meeting with policyholders at Woodford Square, Port-of-Spain, yesterday. Prem Beharry, a member of CPG, updated investors on the situation, after five recent meetings with the inter-ministerial team headed by Minister Vasant Bharath. Beharry and CPG deputy chairman Peter Permell outlined the two proposals which CPG has made to the Bharath team. Permell said he had spoken with Bharath who was overseas last week. But he said the group did not know the outcome of the situation yet. "We do not know when an announcement will be made and I've said on your behalf that is unacceptable," he said.
"We can't wait another month–peoples' bills are piling up and we need to have this resolved very quickly...the ball is now in Government's court." At the end of the meeting, policyholders, by a show of hands, mandated the one week deadline to be conveyed to the Government. Speaking about CPG's proposals, Beharry said CPG hired a New York-based firm, Ryan ALM Inc to make recommendations on the issue. He said a third recommendation which went to the Government involved a local financier. He said CPG believed that party presented a proposal also. "Ryan ALM are saying they would take US$600 million and would convert it to the best debt instrument in the world which is US Treasury Bills," Beharry said.
"The Ryan ALM group is saying, within three months if they are engaged, they would be able to sell those bonds and get in cash of US$1.8 billion which is equal to the debt of TT$10.5 billion–that money would be used to pay all the policyholders." Beharry warned that there were also risks. He said mathematically, T&T would have to carry the debt of US$1.8 billion on its books. He, however, noted the Government's concern about increasing T&T's debt to GDP ratio.
He said the US proposal would only work in an environment where interest rates in the US were on the rise. Permell, outlining another aspect of CPG's proposal, said the group "categorically rejects" the Government's decision not to consider the capitalised interest.
"We are saying capitalised interest must form part of the liabilities to the policyholders and we are not negotiating that," he said. The group's second suggestion is that credit unions and trade unions should be paid 100 per cent of the amount due to them regardless of their size of principal, plus capitalised interest because their investments are small. The third proposal includes an immediate payment of 40 per cent. "You should be paid 40 per cent up front and the balance should be paid by Government of T&T bonds," Permell said. "There is a fancy name called principal protected amortised notes, which we are suggesting are going to be paid on a quarterly basis over the next five to seven years, between four to four point five per cent interest." He said after the proposed 40 per cent has been paid out, the remaining would be given in amortised bonds over the five to seven year period.
"You're probably going to get 50 per cent in five-year bonds and another 50 per cent in seven-year bonds," he said. "The five-year bonds will carry a rate of four per cent and the seven-year bonds will carry a rate of four and a half per cent." Permell said there was a market for bonds, and if anyone wanted immediate cash they could liquidate their bonds and convert it to cash. The plan is for the interest on the bonds to be paid on a quarterly basis. Regarding investments over $75,000 such as for corporations, he said: "The State could wait, corporations could wait–but we can't wait. We are saying in order to assist with the whole cash flow situation, let them take their money at the end of the seven-year period by a 'bullet' payment."
The next suggestion is that the bonds must be transferrable so if the owner of the bond dies, it can be bequeathed. Permell said interest payments, which were stopped on September 9, should be resumed at the suggested market rate of five per cent. If the Government resorts to the sale of the (Clico) assets, Permell said: "While we are being reasonable and we have decided to wait five to seven years to get the balance of our money, if during that period those assets appreciate in value, and they are sold for an amount in excess of their book value, any gain on that sale should be shared with the policyholders.
"We have suggested a ratio of 49:51 per cent, where the Government gets 49 per cent and the policyholders 51 per cent," he said. He said litigation is a last resort. But if it becomes necessary, action would be taken. Permell who called on Central Bank Governor Ewart Williams to make a statement on the issue, threatened to call for Williams' resignation. Saying the Governor was open to liability and litigation on the issue, Permell said Williams could no longer remain silent. He insisted that whatever Government was in power–"whether PP, COP, TOP, UNC" – it would have to implement th strategy the former administration initiated.
