Friday, November 2 2012

NOT ONLY will 16,000 Clico policyholders stand to benefit from the launch of a new $5.1 billion Clico Investment Fund, but the general population will also have access to a stake in the country’s largest bank, Republic Bank Limited (RBL), Finance Minister Larry Howai indicated yesterday.

“The market for this will, generally, come from the public,” Howai said at a press conference to launch the Clico Investment Fund at the Ministry of Finance, Independence Square, Port-of- Spain. “Anyone who may wish to buy or sell these short-term investment products will do so because they will be freely traded through the stock exchange. So it would be open to anyone in the public.”

Howai said the fund was “the largest initial offer” of its kind and represented “a major milestone”. He also said the fund will effectively allow members of the general population to buy and sell shares in Republic Bank in circumstances where this would be difficult otherwise. The fund has been set up as a close-ended mutual fund, not to exceed ten years, and the units issued will be tradable on the Trinidad and Tobago Stock Exchange. Clico Trust Corporation Ltd is the trustee of the fund, and is chaired by Jerry Hospedales, a former permanent secretary in the Finance Ministry and former head of the Divestment Secretariat.

The assets anchoring the fund and providing it with income are 40,072,299 shares in RBL previously owned by Clico, worth about $4.4 billion, and $702 million in Government bonds, pending the insertion of more RBL shares currently owned by in-liquidation Clico Investment Bank. Each unit will be valued at $25.

The idea behind the fund is to have Clico policyholders exchange zero-rated coupon bonds for their nominal equivalent in units. Policyholders had previously agreed to accept the bonds in exchange for money they were owed by Clico.

Howai said this would be beneficial to policyholders because unit-holders will not attract tax on related income and capital gains received, nor will any stamp duty apply to the transfer of bonds or units. About 95 percent of dividend interest will go to the fund and dividend payments will be made to unit-holders on February 21 and August 21of each year of the life of the fund.

Additionally, policyholders, if they opt to cash units, stand to get $1 for $1 as opposed to 50 cents on a dollar on current rates, Howai said. Clico policyholders who took bonds have until December 14 to convert their bonds to units. “These are substantial benefits,” Howai said. “The dividend yield is quite good.”

The Finance Minister also indicated that the general public, looking to acquire a share in RBL, will now also gain from the trading of these units, due to begin on January 2, 2013.

“You may find that you may wish to buy Republic Bank shares but nobody wishes to trade,” Howai said. “But now you may be able to access it through this particular mechanism.”

Ten years ago, Republic Bank shares were trading at $36 per share. As at October 31, they were trading at $109. 69.

At yesterday’s launch were advisers from Ernst & Young and Johnson, Camacho & Singh who assisted in the launch of the fund.

Ernst & Young chairman Colin Soo-Ping Chow said a key factor in deciding the pricing per unit of the fund was affordability.

“In deciding the value per unit, the decisions that were taken into account would be to try and establish a value that would be considered attractive if people would like to purchase units,” he said. “We therefore wanted to ensure that the units would not be viewed as being too expensive. And therefore the simple decision that we made was to issue 40 units at $25 per unit for each bond of $1,000.”

Clico policyholders who accepted the Government’s offer of bonds are to redeem their 11 to 20 year zero-rated coupon bonds for units in the fund.

CL Financial companies hold the following shares in Republic Bank: Clico 51,858,299 (32.29 percent; Clico Investment Bank (CIB) Limited (in liquidation) 16,196,905 (10.8 percent); and First Company Limited 13,191,640 (8.21 percent).

Howai said 40,072, 299 shares would be placed into the trust fund initially. The CIB shares will also go into the fund but only after the court approves this move. He said there could be further movements into the fund.

In relation to the use of 95 percent of dividend income, Howai said the fund would have expenses including audit fees, directors fees, legal expenses and expenses that will come up from time to time.

Clico Policyholders Group spokesperson Peter Permell yesterday noted that the placing of the $5.1 billion shares in the fund owned by the State effectively pays back this amount to the State.

“The State had initially put in $5 billion into Clico and now in transferring these shares into the fund, Clico is paying the Government and the Government is paying shareholders,” he said.

In a statement issued on Wednesday, he welcomed the announcement that the fund is to be administered by RBL.

“The Clico Policyholders Group welcomes the establishment of the Clico Trust Corporation Limited by the GORTT and wishes to express our confidence in Republic Bank Ltd as the fund administration agent as well as one of the distributors of the fund,” he said.