Last Thurs­day, in this space, there was a com­men­tary head­lined “What does dis­charge of Mar­itime in­junc­tion mean for Cli­co’s fu­ture?”

That col­umn, it seems, sparked some think­ing about the fu­ture of the in­sur­ance com­pa­ny that was found­ed by Cyril Duprey in 1936, as the first lo­cal­ly owned in­sur­er in­cor­po­rat­ed in T&T, ac­cord­ing to an Au­gust 2020 Cen­tral Bank pa­per ti­tled “Fi­nan­cial sec­tion res­o­lu­tions: Lessons from the Cli­co, BAT and CIB ex­pe­ri­ence.”

That pa­per in­di­cates that Cli­co be­gan op­er­a­tions on June 1, 1937, of­fer­ing in­dus­tri­al in­sur­ance and that by 1946 it “had es­tab­lished branch of­fices in Grena­da, Guyana, An­tigua, Bar­ba­dos, St Vin­cent, St Kitts and St Lu­cia with sub­sidiaries and in­vest­ments in fi­nan­cial sec­tor busi­ness­es, in this coun­try and the Caribbean re­gion.”

As a re­sult of its longevi­ty and re­silience—as well as the fact that the com­pa­ny has sold in­sur­ance poli­cies to thou­sands of in­di­vid­u­als and com­pa­nies across this re­gion—Cli­co is the source of pride and good­will in this coun­try.

Cli­co is in a cat­e­go­ry of lo­cal com­pa­nies that were es­tab­lished decades or cen­turies ago and are still in op­er­a­tion to­day, hav­ing ex­pand­ed suc­cess­ful­ly out­side of this coun­try. Sim­i­lar com­pa­nies in­clude An­gos­tu­ra Hold­ings Ltd, set up in 1824, and Re­pub­lic Bank, found­ed in 1834.

There are many Trin­bag­o­ni­ans who can say that their stan­dard of liv­ing is what it is to­day be­cause a grand­par­ent pur­chased an in­sur­ance pol­i­cy from Cli­co, got their first loan from Re­pub­lic or worked for An­gos­tu­ra. It is not a co­in­ci­dence that Cli­co has owned a sig­nif­i­cant per­cent­age of both Re­pub­lic Bank and An­gos­tu­ra.

The icon­ic sta­tus of these three lo­cal com­pa­nies —and there are oth­ers—may have con­tributed to a writ­ten re­sponse to last week’s col­umn.

That let­ter writer raised, as a ques­tion, of whether it is in the na­tion­al in­ter­est for Cli­co to be al­lowed to write new busi­ness and there­by grow so that its shares be­come more valu­able in the fu­ture.

If at some point down the road, the Gov­ern­ment choos­es to dis­pose of its 49 per cent share­hold­ing in Cli­co, then those shares should be sold to the high­est bid­der or list­ed on the Trinidad and To­ba­go Stock Ex­change to get the high­est re­turn for the tax­pay­ers, the let­ter writer ar­gued.

“If Cli­co was al­lowed to write new busi­ness and run for a cou­ple of years be­fore an IPO or sale, wouldn’t you agree that tax­pay­ers can re­cov­er more mon­ey than what they can re­cov­er by sell­ing to Sagi­cor now?

“I raise the is­sue of Home Con­struc­tion Ltd sell­ing its stake in Agos­ti­ni in 2020. If they had kept the shares, the val­ue of those shares would have near­ly tripled,” ac­cord­ing to the let­ter writer.

Cost of liq­ui­da­tion

My ini­tial re­sponse to the email from the let­ter writer was that the na­tion­al in­ter­est lies in Cli­co/CL Fi­nan­cial re­pay­ing the Gov­ern­ment, which rep­re­sents the tax­pay­ers of this coun­try, all of the mon­ey that was used to bail out the CL Fi­nan­cial group as soon as pos­si­ble.

In re­sponse to ad­di­tion­al points raised by the let­ter writer, I made the point that the sole pur­pose of a cred­i­tor (Cor­po­ra­tion Sole) putting a com­pa­ny in liq­ui­da­tion (CL Fi­nan­cial) is to re­cov­er the mon­ey owed to the cred­i­tor, as soon as pos­si­ble.

The longer the liq­ui­da­tion ex­er­cise takes—it has al­ready tak­en sev­en years—the more ex­pen­sive it be­comes.​ Plain and sim­ple.

The ev­i­dence of the fact that liq­ui­da­tions be­come more ex­pen­sive the longer they take can be found in the 12th re­port of the Joint Liq­uida­tors to the High Court. That re­port is on the Grant Thorn­ton let­ter­head, is dat­ed Oc­to­ber 20, 2023, is signed by David Holukoff as joint liq­uida­tor, and is for the pe­ri­od Jan­u­ary 1 2023 to June 30, 2023.

In the re­port, the joint liq­uida­tors state: “From Jan­u­ary 1, 2023 to June 30, 2023, the joint liq­uida­tors in­curred time costs of US$1,391,288.54 (af­ter a dis­count of US$902,920) and dis­burse­ments of US$59,180.43.”

If the cost of the joint liq­ui­da­tion is US$1.45 mil­lion for the six-month pe­ri­od, the cost of 12 months of su­per­vi­sion by the joint liq­uida­tors could be US$2.9 mil­lion ($19.72 mil­lion).

The joint liq­uida­tors al­so dis­closed that from the date of their ap­point­ment to June 30, 2023, they in­curred time costs of US$15,999,507.06 and dis­burse­ments of US$718,789.01. In a ta­ble in their 12th re­port, the liq­uida­tors state that for the pe­ri­od Sep­tem­ber 15, 2017, to June 30, 2023, pay­ments to­talling $188.95 mil­lion were made on be­half of CL Fi­nan­cial. Those pay­ments in­clude:

* Liq­uida­tor fees and ex­pens­es of $99.47 mil­lion, which en­com­pass the pe­ri­od of tem­po­rary liq­ui­da­tion;

* Di­rec­tor fees of $7.97 mil­lion;

* Le­gal fees of $35.38 mil­lion;

* Pro­fes­sion­al fees of $12.87 mil­lion;

* Wages and salaries of $11.46 mil­lion; and

*Val­uer fees of $5.39 mil­lion.

Giv­en the in­for­ma­tion out­lined above, there is no doubt that the process of liq­ui­da­tion is very ex­pen­sive. And the process of liq­ui­dat­ing CL Fi­nan­cial would have been more ex­pen­sive had the Gov­ern­ment not ne­go­ti­at­ed a dis­count on the liq­uida­tors’ charges.

Here is what the 12th re­port states on the is­sue of the dis­count:

“On ap­point­ment of the joint liq­uida­tors, it was agreed that all work com­plet­ed by them, and their staff would be com­plet­ed at a dis­count to their 2017 stan­dard hourly charge-out rates. Those rates have been in place since the pro­vi­sion­al liq­ui­da­tion of the com­pa­ny in April 2017 and have not been in­creased since that date.

“Ac­cord­ing­ly, the joint liq­uida­tors note they are work­ing on a dis­count to their 2023 charge-out rates of 44 per cent and have not had an in­crease in the rates for six years.”

The above in­for­ma­tion rais­es sev­er­al ques­tions about the let­ter writer’s pro­pos­al that Cli­co be al­lowed to write new busi­ness and “run for a cou­ple of years be­fore an IPO or sale:”

* If it is as­sumed that Cli­co would be “run for a cou­ple of years” by its cur­rent board—rep­re­sent­ing the joint liq­uida­tors with 51 per cent and Cor­po­ra­tion Sole with 49 per cent— then it stands to rea­son that about US$2.9 mil­lion of Cli­co’s prof­it would go to the joint liq­uida­tors every year?

* Is a board ap­point­ed by Cor­po­ra­tion Sole and joint liq­uida­tors the most ap­pro­pri­ate for an in­sur­ance com­pa­ny that is seek­ing to sell new busi­ness?

* If Cli­co were to be al­lowed to start writ­ing new busi­ness, is it en­vis­aged that the in­sur­ance com­pa­ny would start from scratch, with­out its tra­di­tion­al port­fo­lio OR that it would lever­age its ex­ist­ing tra­di­tion­al port­fo­lio and build on it?

* If it is as­sumed that the in­sur­er would at­tempt to lever­age its ex­ist­ing port­fo­lio, what be­comes of the agree­ment, signed on Sep­tem­ber 30, 2019, to trans­fer the tra­di­tion­al in­sur­ance port­fo­lios of Cli­co and British Amer­i­can Trinidad to Sagi­cor Life?

* Is Sagi­cor Life ex­pect­ed to walk away from that signed agree­ment, or will it com­mence lit­i­ga­tion against Cli­co for breach of con­tract and breach of le­git­i­mate ex­pec­ta­tion (to ac­quire Cli­co)?

* What will be­come of the law­suit brought by Mar­itime Life (Caribbean) against the Cen­tral Bank, in which the se­lec­tion process, which re­sult­ed in the choice of Sagi­cor, is be­ing chal­lenged?

Ad­di­tion­al is­sues arise with re­gard to Cli­co’s fu­ture.

In its 12th re­port, the joint liq­uida­tors place a low val­ue of $3.24 bil­lion and a high val­ue of $6.24 bil­lion on CL Fi­nan­cial as­sets, as at June 30, 2023.

Giv­en that the joint liq­uida­tors es­ti­mate that CL Fi­nan­cial’s un­se­cured cred­i­tors are owed be­tween $16.93 bil­lion and $22.69 bil­lion, they project that the most these cred­i­tors can ex­pect to re­ceive is $0.35 on the dol­lar and the least they would re­ceive is $0.13 on the dol­lar.

With the best will in the world, are those pay­out num­bers like­ly to change sub­stan­tial­ly in the next five years?

And is Cor­po­ra­tion Sole among CL Fi­nan­cial’s un­se­cured cred­i­tors?

What do read­ers think is the best path for Cli­co?

Dis­clo­sure: The au­thor of this com­men­tary owns shares in An­gos­tu­ra and Sagi­cor Fi­nan­cial Com­pa­ny