The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is exploring whether it can raise the ‘guarantee’ vital to moving CLICO (Bahamas) liquidation forward via a $30 million ‘off-balance sheet’ bond issue, Tribune Business can reveal.

Multiple sources confirmed to this newspaper that the Christie administration is examining whether it can raise the necessary ‘guarantee’ financing from investors and the Bahamian capital markets, using bonds that would be issued by a ‘special purpose vehicle’ or SPV.

Simon Wilson, the Ministry of Finance’s deputy financial secretary, who is understood to be the Government’s ‘point man’ in resolving the CLICO (Bahamas) situation, referred Tribune Business to the insolvent insurer’s liquidator, Craig A. ‘Tony’ Gomez, when contacted over the plan.

Mr Gomez, conveniently, is still gagged by the Supreme Court from speaking publicly on the CLICO (Bahamas) liquidation, while members of the creditors committee have also signed a confidentiality clause.

However, sources close to the committee said government officials had alluded to the SPV bond issue plan in meetings with it.

“There was another vehicle they were trying to create in lieu of the guarantee,” one source said of the Ministry of Finance. “That’s the last thing they said.

“They’re trying to develop something. The Government seems confident they will be able to make a statement soon.”

These developments come as hopes rise among CLICO (Bahamas) remaining 13,835 policyholders that the Government is finally moving to honour its ‘guarantee’ commitment, which is vital to securing a buyer for the remaining portfolio.

Without the Government guarantee in place, rival life and health insurers - both Bahamian and foreign - have made it clear they will not contemplate acquiring the remaining policies.

The political temperature over CLICO (Bahamas) plunge into liquidation, and the subsequent financial struggles of its thousands of Bahamian policyholders, who have effectively been left in limbo for five-and-a-half years, was also raised yesterday by DNA leader, Branville McCartney.

He accused both the former Ingraham government and current Christie administration of failing to honour the Government’s commitment, given by the former, to provide the guarantee to facilitate the portfolio sale and provide relief for thousands of Bahamians.

“Many Bahamians will remember the official communication on the CLICO controversy by the former Prime Minister, Hubert Ingraham, who, at the time, assured concerned policyholders that their accounts would be sold to a viable local insurer, and further encouraged those persons to continue making their premium payments as the winding-up process moved forward,” Mr McCartney said.

“While in opposition the Progressive Liberal Party (PLP) was extremely vocal..... While on the campaign trail, the mistreatment of CLICO policy holders was made a platform. At packed rallies the PLP pledged to take action and resolve the matter in favour of the Bahamian people.

“Unfortunately, their inaction on the matter since taking office has again proven that they used misfortunes of Bahamians for political expediency. “

Michael Halkitis, minister of state for finance, did not return Tribune Business e-mails seeking comment, but this newspaper understands that the Government is trying to formalise something ‘concrete’ in relation to the CLICO (Bahamas) guarantee by 2014 year-end.

Sources close to the CLICO (Bahamas) creditors committee, though, suggested that the Government’s fiscal crisis had prevented it from having the “wherewithal’ to previously provide the guarantee.

“I don’t think any amount of pressure will make this happen,” one contact familiar with developments said. “Government just doesn’t have the wherewithal to get the guarantee.

“The committee has been hearing all these things from the Government that they’ve not been able to do.”

Tribune Business understands that Mr Gomez is anxious to sell the remaining CLICO (Bahamas) portfolio, as it is a key step in winding-up the company. He is also having to act as a receiver, rather than a liquidator, in maintaining existing policies.

“The Government needs to come forward and determine what they’re going to do,” one source said. “They used it as a political tool in coming to office, and have done nothing.”

For the Christie administration, the advantage of an SPV bond offering is that the $30 million borrowing could be kept off its books, thus ensuring there is no negative impact to the fiscal deficit or national debt.

With an historically-low interest rate environment in the Bahamas, debt servicing costs on the bonds, which would be repaid via policyholder payments until the portfolio is sold, would also be relatively low. And investor demand should be strong with bank interest rates low.

One CLICO (Bahamas) policyholder, and former creditors committee member, who believes a resolution could be in sight is Bishop Simeon Hall.

Still, he again urged the Government to “move quickly” to “help those persons waylaid by this financial nightmare”, as many policyholders had been forced to put their lives on hold after losing access to their lifetime savings.

“I haven’t heard anything definite from the Government side, but people have been pushing, and lately the level of hope has been raised in terms of expectation on the part of CLICO,” Bishop Hall told Tribune Business.

“I’m hearing more and more people have reason to believe the Government is going to do something. I think they should. More than 30,000 people were involved in this, and many of them have been waylaid by this unfortunate situation. It’s capitalism gone wrong.”

CLICO (Bahamas) was the greatest financial collapse to affect Bahamians since the failure of Gulf Union Bank (Bahamas) in the late 1990s, depriving thousands of their hard-earned savings and lifetime investments - money that has not been seen since early 2009.

But Bishop Hall added: “I believe people are becoming more hopeful based on what they’re hearing. They’re hearing the Government is about to move to put in place the guarantee.

“I hope persons in government are taking the lead to bring an end to this nightmare, this financial nightmare. Both political parties, when in government, fell asleep and they should right this wrong.

“Money is tight. I can tell money is tight even by the collection plate. I want to encourage the Government to move quickly to help those person waylaid by this. We’re without our money, that’s plain and simple,” Bishop Hall said.

“We can’t do anything without the money. If you make investments, and the investment goes belly up, it puts you at a major disadvantage.

“If you made plans for 20-something years, and that money has been lost and you don’t know where it’s going, it adds to the mental stress of people in this country.

“This is one where the Government should do all in its power, even to the point of borrowing, to bring resolution to this matter. There are those who have lost tremendously and have suffered great pain.”

External observers, including the International Monetary Fund (IMF), have also urged the Government to get a move on in bringing the CLICO (Bahamas) liquidation to a close.

At end-June 2012, CLICO (Bahamas) portfolio contained 13,835 policies with a total surrender value of $20.074 million and cumulative sum assured of $1.093 billion.

CLICO (Bahamas) Bahamian balance sheet at the same date showed a solvency deficiency of $22.162 million at June 30, 2012, with total assets worth $44.794 million outmatched by liabilities totalling $66.956 million.