Tuesday's announcement by CL Financial, the financially troubled conglomerate, that its interim managing director, Steve Bideshi, was departing the job at the end of January may have come as a surprise to many of the company's stakeholders. But the bigger shock is that neither the board of CL Financial nor the Ministry of Finance, which has oversight of the locally owned group, has seen it fit to provide a proper accounting of CL Financial to the citizens of T&T. This is a huge disappointment given the fact that the board–which includes management consultant Shaffick Sultan-Khan, former Central Bank Governor Euric Bobb, Permanent Secretary in the Ministry of Finance Alison Lewis, British QC Andrew Mitchell, insurance executive Steve Castagne, and CL Financial Executive Director Michael Carballo–got off to a bright start by selecting Mr Bideshi in the first place.
Mr Bideshi came to the job with a sterling reputation as an investment banker, who had honed his skills locally as the country manager of Citibank's T&T operation between 1995 and 2004, before the US financial services giant, which is itself in a spot of financial bother, shipped him out to run its operations in Turkey and Israel. As its country manager at a time when local investment bankers travelled up and down the region raising money and advising governments and corporate clients, Mr Bideshi's reputation would have preceded him. It was that reputation, backed by the explicit support of the Government, that would have allowed the banker to restructure a US$240 million bond that the group raised in 2008 to help acquire Jamaica's Lascelles deMercado in 2008.
As part of the agreement for that bond, CL Financial was obliged to maintain unpledged collateral worth US$360 million–or 150 per cent of the value of the bond–in a trust account held by RBTT here. At the end of September, RBTT Trust wrote to CL Financial as follows: "We wish to advise that the security margin of 150 per cent that you are required to maintain pursuant to Clause 4.1.2 of the trust deed and Clause 3.01(e) of the CL Spirits Charge of Shares–both dated July 21, 2008–has not been met for the past two weeks..." CL Financial was given two options by the trust company on behalf of the bondholders, some of which would have been local financial institutions: either make a payment of cash to the tune of US$188.26 million or provide shares of an equal value in either Lascelles deMercado or Republic Bank.
Mr Bideshi negotiated a two-month moratorium with the trust company, giving a commitment that he would have a new agreement in place by the end of January, which would meet the requirements of the bondholders. The fact that Mr Bideshi leaves at the end of January raises the question of whether all the legal and financial details of the deal which he structured have been tidied up or whether the Government will be placed in the embarrassing position of being forced to seek a fresh deferral at the end of January. The point must also be made that the Lascelles bond is not the only one that needs to be restructured or those bondholders the only creditors with which negotiations need to be completed. Not having someone with serious financial credibility to run CL Financial, especially at this time of uncertainty, is likely to cost the Government dearly.
It is worth noting, as well, that Standard & Poor's, the credit rating agency, removed T&T from its negative credit watch in September after this country was placed on a negative watch shortly after the Government's January 30, 2009, announcement of the billion-dollar bailout of the conglomerate. It is an open question whether the departure of Mr Bideshi at this time may cause the rating agency to take another look at T&T. If that sounds far-fetched to some, reference would simply need to be made to the fact that three credit rating agencies downgraded Jamaica in the wake of that's Government's dismissal of its Central Bank Governor late last year.
In its negotiations with Mr Bideshi, then, we certainly do hope it was not a case of the Government being penny wise–in trying to fight him down for a few dollars–and ending up being pound foolish.