CL Financial, the economy and the future – Part 3

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The TTWhistleblower continues a deep and thorough look at CL Financial, the circumstances surrounding its corporate governance, and the impact it has had on the economy of Trinidad and Tobago by its collapse. In part three, we look the new dramas surrounding CL and its sale of No Man’s Land to the Government

The time in between

Imbert also noted that:

· Nothing was done to recover the money used in the CL bailout until September 2015;
· No audits were done on the CLF accounts;
· Nothing was done to verify the amounts due from CLF

An agreement to move towards re-payment by CL to the Government was arrived at in April 2015 when it was agreed that the Central Bank would pay TT$7.2 billion from the surplus in CLICO’s statutory fund.

At that point, a payment of $4 billion was made in April 2015 with the remainder to be settled by way of the transfer of shares in Angostura, HCL and other CLF subsidiaries. Imbert has, since taking office four and a half months later, not pursued the additional terms of the agreement and in the two subsequent years, nothing was done to move the company into liquidation

It has also been reported that over the time since 2010, assets were continually disposed of to ensure that the amounts due to secured lenders were repaid to avoid the Group or any of its subsidiaries going into receivership.

Among the assets disposed of, with agreement from CLF shareholders were Laschelles del Mercado. The proceeds of this sale were used to pay off debt and protect the assets of Angostura from being placed in receivership.

This, together with the assumption of certain debts on Angostura’s books by CLF allowed Angostura to be re-listed on the Trinidad and Tobago Stock Exchange.

Further, liquidators in the Bahamas had obtained an order from their own courts and, in 2014, were seeking to bring action in Trinidad and Tobago’s courts to move to wind up CLF.

In an attempt to prevent what could have had a negative impact on CL and the local economy, the previous People’s Partnership Administration bought out the rights of those liquidators together with the 14% shareholding in CLF.

By mid-2015, the then Government reached an outline agreement with the shareholders, which allowed for the sale of certain assets including Republic Bank and MHTL shares to reduce the balance outstanding to Government by a further $9-12 billion.

This move resulted in the transfer of HCL, Angostura and (I believe) CL Marine to CLF with the Government being able to take a debenture over the fixed and floating assets of the company.

A debenture is a long-term security which yields interest at a fixed rate and is issued by an organisation and secured against its assets.

CL in ‘No Man’s Land’

Last month, CL Financial maintained headlines when its Tobago land asset, ‘No Man’s Land’ at Buccoo Estate was transferred to the Government at a cost of $174.8 million.

Immediate controversy surrounded the asset transfer, especially as it is the prime Tobago real estate being eyed by the controversial Sandals’ Resorts, which has been heavily promoted by the Prime Minister with the chant – “Let’s dream this, let’s see this.”

On 15 June 2016, news reports in the Trinidad Express quoted the Prime Minister as saying: “We took steps to present Tobago as a potential site… we already had a presentation by Sandals to the Cabinet of Trinidad and Tobago and a presentation only Wednesday gone to the THA in Tobago, and we move forward now to negotiations for 750 rooms in Tobago to make Tobago a real destination.”

Barely a week later, in the Trinidad Guardian of 21 June 2016, it was reported that: “Antigua and Barbuda’s Prime Minister Gaston Browne has been engaged in a testy public exchange with Sandals Chairman Butch Stewart over Sandals’ retention of sales tax income, by what the Antiguan government has called ‘an unlawful agreement’.”

The report highlighted the fact that the Sandals Resort pays no direct taxes to the Government of Antigua and Barbuda, and that tax-holiday agreed to by the Government extends for another 25 years. Sandals also pays NO taxes on imported capital items, on food or beverage, and on items needed for resort improvements.

Sandals also negotiated a 25-year tax holiday in Barbados, freeing itself from import duties, taxes on imports and levies. And this includes VAT on the importation or local purchase of all capital goods from Barbados such as hotel equipment, furniture, fixtures, vehicles, and computer equipment.

By 04 July 2016, the Trinidad Guardian reported: “Founder and chairman of Sandals Resorts, Gordon “Butch” Stewart, has admitted he has his eyes on No Man’s Land for a 750-room hotel in Tobago.”

Rowley has discussed the project since even before taking over as Prime Minister. In the same news story, of 04 July 2017, it was reported that: “Prime Minister Dr Keith Rowley approached Jamaican hotel tycoon Gordon “Butch” Stewart to bring the Sandals chain to Tobago before he had won last year’s general election.”

Stewart confirmed this in an email interview with the T&T Guardian, noting Rowley approached he and his son Adam when they were here in mid-2015 for a function hosted by the T&T Manufacturers’ Association.

“Adam was a guest speaker at the manufacturing association. A gentleman came up to me and said when I become prime minister I am going to give you a call,” Stewart recalled, noting that man was Rowley.”

The article states: “After winning the 2015 general election, Stewart said he received a call from Rowley.”

The acquisition of ‘No Man’s Land’ for $174.8 million, calculates to less than $10 per square foot of land. There is no place in Trinidad and Tobago where land is being commercially sold at $10 per square foot; not even agricultural land.

The keen promotion of the project by the Prime Minister has therefore raised questions, with many wondering:

· How far will the Trinidad and Tobago Government bend to the will of Butch Stewart’s Sandals Resorts when it comes to tax holidays? and
· If the Government goes the way of Barbados and Antigua & Barbuda, exactly what benefit will this country gain for Sandals’ presence?

The 27 July 2017 Trinidad Guardian news story on the transfer of the CL-owned land also noted that ‘the land will be offered to Sandals chairman Gordon “Butch” Stewart for the construction of two hotel resorts comprising 750 rooms.’

This is despite a Reuters news report in May 2017 that Sandals Resorts International was exploring “strategic alternatives including potential sale of the company and had hired Deutsche Bank to explore several options, including a sale of a majority stake in the company.”

Sandals didn’t confirm or deny the Reuters report and instead stated it is “exploring options to accelerate the company’s long-term growth and development plans. This is not new. Meanwhile, it’s business as usual.”

Further complicating the Sandals saga, the Trinidad Guardian on 27 June 2017 reported on the comments by Tobago House of Assembly Secretary for Finance, Joel Jack, who said ‘nothing was concrete’ with Sandals, and that the project will take three to five years to come to fruition.

As of today therefore, the unfolding saga of Sandals now becoming a new player in the CL drama looks like this:

· The Prime Minister announces sandals’ in mid-2016;
· It is later found out that the Prime Minister promised to pursue the project even before he was Prime Minister, a year before;
· Stories emerge on Sandals presence in two Caribbean countries have no created substantial benefits because of 25 year tax-holiday agreements;
· We then read that the owner of Sandals Resorts already had his eye on Tobago real estate, less than a month after the Prime Minister makes the announcement;
· We then read international reports that Sandals Resorts hired Deutsche Bank to explore several options, including a sale of a majority stake in the company;
· Then we hear, one year after it was first announced, that the project could take three to five years to become a reality.
· The THA Secretary for Finance announces that the project will take three to five years to come to fruition, longer than the average energy project;
· The Rowley Administration successfully takes ownership of No Man’s Land at a cost of $174.8 million, stating its intention to offer it to Sandals.

The controversy on Sandals inheriting ‘No Man’s Land’, however, doesn’t stop there:

In 2016, CLICO carried on its balance sheet the value of the land at roughly $187 million and the transfer agreement was completed on March 2017.

However, Carlton Reis, who represents CL Financial shareholders under the group United Shareholders Ltd, had estimated the land at $500 million.

Clico Policyholders Group Chairman Peter Permell, in a 16 July 2017 Sunday Guardian article, said a ‘Project Rebirth’ report prepared by PricewaterhouseCoopers estimated the fair market value of the property at approximately $867 million an almost 450% in value listed the Rowley Administration.

So while CL Policy and Account holders await completion of agreed terms as part of an almost decade old bailout, one questions whether a fire sale of assets in favour of long-standing investor-friends has become more of a priority that the national good for Trinidad and Tobago…

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