Marlon Holder

Euric Bobb and Claude Musaib-Ali couldn’t take the heat. What special will Holder bring to the table?

Will new kid on the block Marlon Holder turn around CLICO?

Can he succeed where people like international economist Dr Euric Bobb and former CEO Claude Musaib-Ali  have failed?

Reports are that things are indeed grim at the stricken insurance giant with customers taking legal action, the majority surrendering policies and annuities and no new business being written.

Dr Bobb, who six months ago promised that the company would have settled down by December 2009, has obviously resigned in despair, indicating on Wednesday that he had met the company’s account in a big mess. In short, the rescue mission is too much for Bobb,66, a man who is in retirement.

Holder, who became CEO of the Unit Trust, a couple of years ago, is a surprise appointment to return CLICO to good financial health.

The Government has earmarked some $5 billion to help CLICO, having already pumped some $1.5 billion in to its withered veins.

Chairman Euric Bobb….missing in action.

Central Bank Governor Ewart Williams begs for patience. However, people want their money.

Surely, Clico cannot afford more bad news about its finances- particularly when it comes from a High Court judge.

And the beleagured insurance company and the Central Bank, its financial white knight, sprang into action yesterday to convene a press conference to beg for some patience from its policyholders.

Apparently as a damage control measure after the bad publicity, Clico now will be paying out amounts of less than $100,000 of matured policies, pension funds and other securities paid by March 31, according to Acting CEO Carolyn John.

She said that arrangements will be made to pay larger amounts in tranches.

Ms John said that the legal letter from Justice Carlton Best seeking payment of $56,000 was received yesterday and revealed that there were several such letters from other customers.

Central Bank Governor Ewart Williams appealed to Clico’s customers to have some patience stating: “We recognise that policyholders have legal rights and that policyholders could demand their funds immediately but there are costs of enforcing these rights and the reality is-the unfortunate reality is- that if all these policyholders seek to exercise these rights we all are going to be worse off.”

Governor Williams pointed out that Clico had assets which could be monetised but the company would suffer significant losers since the value of shares in companies like MTHL had declined.

The Bank has pumped some $5 billion into Clico but apparently that has gone into a black hole to satisfy some debts. The company has not been writing new business and most people are apparently surrendering their policies and demanding cash surrender value payments.

The trouble is that Clico has some 200,000 policyholders and despite assurances around September by its Chairman Euric Bobb that the company would have recovered from its financial woes by December, no such thing has happened.

What has, in fact, occurred is a flight of some top executives.

Bobb has been missing in action. His upbeat approach has not matched the reality of tight money, customers wanting their money after reports of bigwigs being paid large sums and to make matters worse harried staff fleeing to what they perceive as greener or safer pastures.

The Government kicked off its borrowing this year by issuing a $600 million bond on Thursday.

This bond is to help meet the deficit in recurrent expenditure (estimated at $7.7 billion) and, therefore, one can expect more Government borrowing in fiscal 2010.

The bond auction will close on Friday. This bond will mature in 2025 at a rate of 6.5 per cent per annum.

At the end of the last fiscal year, the gross public debt stock which includes borrowing by central government, statutory authorities and state enterprises amounted to $62.7 billion with the domestic component of this debt being $34.1 billion.

Debt to Gross Domestic Production (GDP) amounted o 40.9 per cent. The country’s annual GDP is over $150 billion.

They say the Trinidad and Tobago economy is in recession. Obviously, nobody told Republic Bank because they made over $1 billion in the last financial year.

The international financial crisis has still not made any significant impact on this country’s banking sector and this fact was underlined by Republic Bank’s annual accounts which showed it making a cool billion dollar after tax profit.

Republic like the other banks is still making loads of money although its customers in manufacturing, retail and distribution and services are seeing hell.

Okay, its profit was $300 million less than last year, given the fact that it had to withstand a run earlier this year when it was reported that the Government through its financial assistance to the fallen C.L. Financial empire had assumed control of that company’s 51.85 per cent stake in the bank.

It still isn’t known the extent of the damage done as businesses pulled out of the bank, however, by September 30, it appeared that the bank had survived that bad scare.

Whether the frequent appearances by Managing Director David Dulal-Whiteway in the electronic media to reassure customers had anything to do with it is not known.

The fact is, that it has been officially pronounced that the country is in recession and Republic like the other local banks are handling the situation quite well unlike 20 years ago when the hard times led to the demise of three banks and several finance houses.

The State continues the trend of going to the local market to raise money. This trend will continue in the New Year as the budget deficit expands.

State owned- Trinidad and Tobago Mortgage Finance Company (TTMF), which only last September floated a $500 million bond is going to the market again for some $320 million.

The bonds will be auctioned next week Wednesday and it is at a fixed rate of six per cent and will mature on December 2014. The bond offered in September was at a rate of seven per cent.

The State sector has been borrowing heavily this year and these latest bonds which are expected to further soak up excess liquidity on the market will bring total borrowing to almost $8 billion.

Exactly month ago, the Education Facilities Company floated a $400 million bond, the first tranche of $1.9 billion in bonds to some 478 early childhood centres throughout the country for the Government.

TTMF offers low interest rate mortgages (as low as two per cent) to first time Housing Development Corporation (HDC) low income homeowners.

The big borrowing spree continues as the Educational Facilities Company floats the first tranche of its $1.9 billion series of school building bonds. So far, this year the Government and state companies have gone to the local and foreign bond market for well over $7 billion.

The little-known Educational Facilities Company Ltd (EFCL) which has been building early childhood centres and other schools is the latest Government company to go to the public to raise money for its activities.

The EFCL has floated a $400 million bond which has a fixed rate of 5.35 per cent and which will be due in 2016. Auction of the bonds which began last Monday will close on Wednesday.

The bonds are the first in a series that will issued over the next four years for a total of $1.9 billion to construct early child care centres.

Some 478 centres are scheduled to be constructed between 2009 and 2013. Some 100 are to be completed by next year; some 150 in 2010/2011 the same amount between 2011/2012 and 78 in 2012/2013.

This special purpose company, like the controversial UDECOTT, is a project manager and is responsible for the repair and upgrade of all schools, early childhood centres and education district offices.

It will be unfair to say that it has provided these services to the satisfaction of the public as evidenced by the state of disrepair of many of the country’s schools and the rush each year during the July-August vacations to rehabilitate these schools.

Anyhow, just as TTMF, which successfully issued a $500 million bond in April and NIPDEC which issued a $682 million bond last month, the ECFL bond will be probably be over-subscribed, primarily, because of the excess liquidity in the financial sector.

The Government also went to the market with a billion dollar bond earlier this year while Petrotrin floated a $5 billion bond in the United States.

Lots of borrowing-more of the same to come as revenue falls and money becomes tight.

The TTMF bond offer closes on Friday. The coming months will see a pattern of large scale borrowing by the Government and state agencies and companies.

The Trinidad and Tobago Mortgage Finance Company Ltd (TTMF), which offers the lowest mortgage rates on the local market, has floated a 15-year $500 million bond.

TTMF is offering an interest rate of seven per cent per annum when mortgages to Housing Development Corporation (HDC) homeowners are at six per cent which makes for interesting arithmetic.

Institutional investors-banks, insurance companies, big business- usually snap up these bonds and surely by Friday when the offer closes, it should be oversubscribed.

The Government and state agencies would have floated well over $2 billion in bonds this year. Petrotrin issued a $5 billion bond on the international market several weeks ago.

This will be the pattern in the coming months as the Government and State companies and agencies borrow, borrow, borrow in these cash-strapped times.

]]> http://www.tntinsider.com/finance/01857/ttmf-floats-500-million-bond/feed/ 0 http://www.tntinsider.com/finance/01792/4250-million-from-property-tax/ http://www.tntinsider.com/finance/01792/4250-million-from-property-tax/#comments Mon, 14 Sep 2009 18:36:01 +0000 TNT Insider Staff http://www.tntinsider.com/?p=1792

People are bawling. Will Karen relent and lower property tax rate?

The Government’s new property tax regime is expected to net Government a cool $250 million next year.

That is the word from Finance Minister Karen Nunez-Tesheira as she confronts howls of protests at this new tax which is expected to impact heavily on the lower middle class and people with modest fixed incomes.

Instead of paying around $200 annually property owners will be taxed at the rate of three per cent of the monthly rental value of their homes, on an annual basis.

This could mean that properties in suburbs like Woodbrook could attract annual property taxes of around $3,000 or more.

The Minister said that this was to modernise the system and bring some parity in that houses in rural areas would attract lower taxes than those in urban areas.

It is left to be seen whether, in winding up the budget, whether she would make any adjustment to this new Property Tax.

Nothing in the budget for the elderly. And the middle-class ends up getting squeezed

Many Trinis doubt that Finance Minister Karen Nunez-Tesheira’s 2010 budget would benefit them and some think it offers little to promote economic and social development.

Nunez-Tesheira presented the $44.3 billion budget to Parliament on Monday announcing a series of tax increases and other measures aimed at improving the health and transportation sectors, taxing home owners and reducing crime.

The budget outlined $44.3 billion in government spending over the next fiscal year based on an average oil price of US$55 a barrel and gas price of US$2.75 per mmbtu. The average oil price on September 7 was about US$68 a barrel.

It is not clear how the Government arrived at this oil price calculation.

Oil prices are based on a series of international economic and political developments over which small countries like Trinidad and Tobago have no input.

Nunez-Tesheira announced tax increases of between 15 and 30 per cent on the sale of cigarettes and alcohol.

She also announced a series of fiscal incentives aimed at assisting first time home owners and an increase in the fines for a series of driving offences.

Unlike the 2009 budget, she did not offer any increase for pensioners some of whom, in fact, had their pension income reduced bv about $700 this year because of the application of an old law on the ceiling for pension income.

“The elderly are always the hardest hit by these budgets,” complained Cascade pensioner Bruce Smart.

“I will have to pay more for cigarettes and drinks, my two forms of relaxation, and food prices will almost certainly keep rising.

“The poor suffer more every year while these budgets assist mainly the wealthy,” he added.

Many middle class Trinis commpain that the fiscal measures assist mainly the very poor and the wealthy and that they are being squeezed more and more every year.

Many complain that Government spending on prestige projects like two summits in Port of Spain this year at a cost of about one billlion dollars is a waste of taxpayers’ money.

Nunez -Tesheira defended the Government’s decision to host the two summits, saying they would help attract more tourists.

She said that the Government had allocated $2.2 billion for Tobago and said tourism to both Trinidad and Tobago was increasing.

This suggested that the global recession provoked by the US financial crisis last year is abating.

Nunez-Tesheira also told Parliament that the Government’s bailed out of Clico early this year was necessary to safeguard the funds of depositors and to save jobs.

The minister also said that the Government agreed that the present level of crime was unacceptable and that it planned to purchase new vessels for the Coast Guard and helicopters to assists in the fight against drug trafficking.

“This is just another measures fuelling corruption” said a Trini economist who lives in the United States.

“Just about every contract involving military purchases involves some corruption,” he said in a telephone interview.

“It would make more sense and would be much cheaper if the authorities tried to infiltrate the criminal gangs,” he added.

Nunez -Tesheira also announced that the Government had contracted a foreign expert to advise it on how to tackle the crime situation and that he had made several recommendations which would be announced later.

For his part, Opposition leader Basdeo Panday said the budget was the “most shameful” he had ever heard.

He said that the minister’s announcement of stiffer fines for driving violations was meaningless because “you never see the police on highways.”

“Before you fine someone you have to catch tbem first,” he said.

Nobody seems to be impressed with the 2010 budget which was presented on Monday .How is Government going to finance the $7.7 billion deficit?

The Government has, generally, received bad reviews for its$44.3 billion 2010 budget. It got much less than a passing grade from the movers and shakers in the society.

It has been knocked by the business community, economists, farmers, property owners and, of course, the opposition.

The Trinidad and Tobago Chamber of Industry Commerce, for instance, feels that “there were no real incentives for diversification should oil and gas prices continue to be unstable”.

The Chamber saw a “rehash” of old measures and no plan to lessen the dependence on oil and gas”.

Chamber President Angella Persad said “we in the Chamber are concerned, however, that while the budget projected a deficit of $7 billion, we did not see a clear and creative plan to lessen the country’s dependence on volatile oil and gas revenues.”

Accounting firm fPricewaterhouseCoopers charged that there was an “absence pf real incentives to the petroleum sector” and a “reintroduction of the capital investment allowance could have been more meaningful”. It warned that in the sbsence of competitive fiscal measures investment would flow elsewhere.

Wade George of accountants Ernst and Young felt that “a sense of urgency” and “a sense of time lines is not there.

Some businessmen felt that what was done was done in a hurry.

Nal Ramsingh, president of the Couva/ Point Lisas Chamber of Commerce, called for infrastructural development in the area, seeing that it was primarily an agricultural region,

Economist dR Ronald Ramkissoon was not impressed with measures to stimulate oil and gas production “What will be the effect of all these fiscal regimes?”, he asked. He said “energy sector was left hanging in the balance” and ‘unless we find the right balance, we will not get the production of oil and gas going”.

Economist Dr Patrick Watson felt that the budget was done in a hurry and warned that the budget deficit would be greater than the $7.7 billion and hwe wanted to know how it would be financed. “The budget is too little too late to ensure the short run stabilization of the economy.

Norris Deonarine, president of the National Foodcrop Farmers Association, was unhappy with the measures for agriculture.

He said: “I think they have missed the ship again to diversify the economy to give the agriculture sector the important role it should play in the society.”

Regarding proposals for a three per cent tax for properties throughout the country which Finance Minister Karen Nunez-Tesheira almost as a joke said “ it’s not a tax on you, it’s a tax on the property” there have been howls of protest throughout the country with the measure being condemned as putting additional burden on the middle class.

It was pointed out that a house in Woodbrook which could be rented for $9,000 monthly would fetch an annual tax of over $3,000.