T&T government has majority control in Republic Financial

(CMR) The following is a republication from Trinidad & Tobago's Newsday news site on the company set to acquire Cayman National Corporation.

May 11. 2018

THE government now controls 51 percent of shares in Republic Financial Holdings Ltd (RFHL), the parent company of the country’s biggest commercial bank, Republic Bank Ltd. This after Clico Investment Bank, which is in liquidation, started its debt repayment to the government, transferring about 42.5 million RFHL shares worth $4.3 billion to the government.

The government also owns some 40 million RFHL shares that it had purchased from Clico in 2012 and then transferred to the Clico Trust Corporation, the administrator of the Clico Investment Fund (CIF), established as a way for Clico bondholders to recoup some of their investment after Clico went bankrupt in 2009.

The government had to bail out the company to the tune of $23 billion—a bill taxpayers had to foot. The CIB shares are 26 percent of the RFHL’s market capitalization (total shares on the market), while the CIF shares are 25 percent.

And just as RFHL shares underpin the primary assets of the CIF (which also includes government securities), the CIB shares will be the foundation of the National Investment Fund (NIF), which Finance Minister Colm Imbert said will be launched next month. Imbert said that come June, the government will place 49.9 percent of the RFHL shares into the NIF.

While the government does effectively own 51 percent of RFHL, it will likely not impact the actual running of the bank. The government, as trustee of the CIF, does not have voting rights for those shares. As part of the constitution of the CIF, there is to be no change to the management and/or operation of the RBL Group, the bank had said in a 2012 statement. The government does, however, have voting rights on the CIB shares, so there is the possibility it can exert influence there, but, as one analyst who declined to be named, noted, since the funds will be placed in NIF it is unlikely the government will do much beyond that.

What would be interesting, the analyst noted, was how the fund was valued and who the largest investors would be. The government is also the majority shareholder for the First Citizens Group, the country’s third-biggest commercial bank, with a 55 percent interest. Newsday contacted Republic Bank’s managing director Nigel Baptiste via email for a comment but he did not respond, neither did the regulator, the Central Bank’s Office of the Inspector of Financial Institutions.

According to the RFHL Annual Report for 2017, The CIF is the largest shareholder in RFHL, with 25 percent; CIB on its own is the third biggest, with 10 percent, but the settlement to the government also included 11.8 million shares owned by Clico and 13.3 million shares owned by Clico-connected shell company First Company Ltd.