Trinidad Dismantles Ailing Conglomerate

Trinidad & Tobago is moving to break up and take ownership of CL Financial Group, which controls some $16bn in assets including one of the country’s largest insurers. T&T’s finance minister and central bank governor are billing the move as a bailout to protect investors. The group’s holdings include majority stakes in Republic Bank and Methanol Holdings, the island’s main methanol producer, several of its own banking units, including CLICO Investment Bank, and its flagship insurance company CLICO Insurance. AM Best, the insurance rating agency which downgraded CLICO on Monday to B from B++, notes CL Financial has run into liquidity problems following a rapid decline in methanol prices and the value of real estate holdings, of which the conglomerate has many. Tightening cross-border credit markets also reduced the holding company’s ability to meet short term debt requirements, while local reports say corporate depositors, including state-owned National Gas Company, withdrew hundreds of millions of dollars at CLICO, CIB and CMMB as they faced their own liquidity problems, further depleting its funding base. The government of T&T says it plans to assume control of CLICO Investment Bank, and transfer its third party liabilities and assets to state-owned First Citizens Bank. The bailout also includes full backing for CLICO Insurance and British American Insurance by the T&T central bank. CL Financial will sell its 55% stake in Republic Bank and the 56% it owns in Methanol Holdings. JPMorgan characterizes the measures as a “pre-emptive move to contain any contagion.” The shop does not believe the troubles at CL Financial are symptomatic of a broader systemic problem. Central bank and finance ministry officials didn’t return calls seeking comment. CLICO officials also declined to return calls.