Permell: Let’s go back to the table

The interview was edited for brevity and clarity.

Could you describe

your relationship

with this situation?

I am Peter Permell, the chairman of the Clico Policyholders Group. We have formed an alliance with the United Shareholders Limited. We are totally opposed to the liquidation of CL Financial, because as far as we are concerned that will lead to a fire sale of assets. The only beneficiaries of that fire sale would be big business, people with deep pockets, high net worth individuals who would be in a position to buy up those assets very cheaply. Because, in a fire sale, the assets will be sold at a discount, they will not be sold at their true value. Further, we are in a depressed economy and that will further exacerbate the situation.

This may be a naïve question, but why are

the shareholders so sure there will be a fire sale and not an honest disposal of the assets?

It is not a question of whether the liquidators will want not want to have an honest disposal of the assets. The history has shown us that whenever you say liquidation of assets any prospective buyer of those assets will want to get it at a discount because they know it’s a distressed company that they are dealing with. That is just how the financial world works. In the best of times, liquidation results in cents on the dollar. I don’t know of any liquidation where the company has realized full worth of the assets. It is always cents on the dollar. The history is replete with examples that would demonstrate that.

To turn the issue a bit, you’ve been here almost since the beginning of this issue. That, is almost ten years. Could you give me a sense of where you are emotionally at this time?

I try to be very dispassionate when I deal with these issues, to look at these issues in a very clinical way, because these are early days still. There is no guarantee that the government will be granted the winding up petition.

Maybe I should explain that situation to the benefit of your readers. What has happened yesterday is that the Court of Appeal has reversed the decision of Justice Ramcharan, who had not granted the application of the state to have a provisional liquidator appointed. The Justices of Appeal would have heard the matter and based on the points of law and the facts, they would have found that the judge tended to error in his judgement.

What they have done in a nutshell is reversed the decision of Justice Ramcharan in the High Court and they in fact issued the order for the appointment of a provisional liquidator. As we speak, there have been two provision court appointed liquidators. The company is called Grant and Thornton. Their function is really to preserve the assets, pending the outcome of the substantive action which is to have CL Financial wound up. The reason you need that holding position is the substantive matter could take several weeks, months probably even years to be determined.

Is the potential for liquidation creating an issue where people are not likely to be paid?

You can jeopardize that. Because at a fire sale, you get cents on the dollar. If you allow these things to run their course, and it is mutually agreed, then you have an orderly disposal of the assets. Everyone knew that the company was insolvent. That was not news to us or the country. But the whole idea was that the company would have been able to generate cash flow in the future that would pay back the debt to the government and all the other stakeholders. If you precipitate a liquidation, if you precipitate a fire sale, then you are going to get cents on the dollar. As I have seen in one report done by Pannell Kerr Foster (PKF) in 2013, they said that in a forced liquidation, which is what this is, you can get 21 cents on the dollar. That was at that time. I don’t know what the current position is, but PWC has said they can lose as much as $7.8 billion of value.

Could you give me an

idea of some of the

assets at risk here?

The judge tried to point out yesterday, that this provisional liquidation, the liquidators’ responsibilities are consigned to CL Financial. If you understand the structure of CL Financial, that company is a holding company, which holds shares for the subsidiary companies, which will be companies like Angostura, Home Construction Limited, the Tru Valu Supermarket chain. You have the malls, Trincity Mall, Long Circular Mall. Valpark was also one of the assets, but this was sold when the Partnership was in office. I am not sure what it was sold for. This whole question of sale of assets, that is going to be done in secrecy. The public is not going to be aware of those transactions.

Remember we are still only talking provisional liquidators here. The provisional liquidators are supposed to preserve assets, while the actual one disposes of assets. Hypothetically, if a liquidator is appointed, they will have the power to dispose of assets either by public auction or private treaty. If they receive offers from people, they have the discretion to decide whether those assets are sold. An accounting of that liquidation process is only likely to be done at the end of that liquidation process, unless the court decides we should come to the court periodically and give an accounting. The general public, unless the media is covering it, would not know which assets were sold and who they were sold too.

Another point I wanted to raise, aside from the cents on the dollar issue, is the length of time the liquidation will take. Liquidations traditionally run several years. Besides the big business people who have the money to buy the assets, the people who will benefit are liquidators, whose salaries are usually exorbitant, the lawyers who will have to be working with the liquidators, the accountants, the auditors etc. So there is going to be another feeding frenzy in my view.

So this situation could easily run another eight, nine years?

Even to get to the point where a liquidator is appointed, that could take another year or two. The both sides will be having arguments and counter arguments. Then if anyone loses, there is the option of appeal, either to the Court of Appeal or to the Privy Council. And we are just talking about the appointment of a liquidator. This is why I am saying, this is not the way to go. Go back to the negotiation table, let both parties work out an amicable settlement. Because the shareholders want to get back their company. They want to pay off the government, they want to make money and continue doing business. With this route, they are not going to be able to do that. The government is not going to be able to get back all the money that they put out. A lot of employees may have to be terminated, because you are going to have some loss of jobs inside of there. The policyholders will be in jeopardy.

My whole sense is, when you start with CL Financial, when that train leaves the station, the next stop is likely to be Clico. What is to stop the government from saying that Clico is insolvent after eight years, let’s wind up Clico now. Nothing is stopping them from doing that. No one anticipated that this was the route the government was going to take. I think this took everyone by surprise.

We are genuinely concerned as to what is going on here, hence the reason we have thrown our support behind the shareholders in trying to stop this liquidation. What we are saying to both sides is go back to the table and let us work this thing out. Stop letting egos get in the way. People have cemented their positions because of egos. You are going to have collateral damage, which would be the taxpayers, the shareholders and the policyholders. When elephants fight, only the grass gets trampled.