In T&T: Clico bond update

17 September 2012

New (but not specific) deadline for NEL2 setup…expected “pick-up in acceptance and trading” toward the end of September.

Last week, Finance Minister Larry Howai promised that by year’s end there would be a resolution to the Government’s Enhanced Payoff Regime geared towards CLICO/BAT policyholders.

And, with the deadline for acceptance less than two weeks away, our analysis has found that there are many who have yet to accept the Government’s offer. Those who have already accepted the offer and currently hold Government of the Republic of Trinidad and Tobago Zero Coupon Bonds (GORTT ZCBs) would have been pleased to hear the Minister state that the process for accepting the CLICO Investment Trust or NEL 2 shares should start by around the middle of October. In light of these developments, we continue our coverage on the status of the Government’s Payout Regime and, in particular the NEL 2.

Allocations and Transfers Update

The Central Bank of Trinidad and Tobago (CBTT) reported that as at September 11th 2012, allocation letters with an aggregate face value of $8.04 billion of 1-20 year GORTT ZCBs were issued to bondholders. This represents approximately 76.57 per cent of the proposed $10.5 billion payoff. Out of those allocations, $4.0 billion was traded on the secondary market within the 1-10 year range. These figures suggest that roughly 76.19 per cent of 1-10 year bondholders have opted to encash their 1-10 bonds. These 1-10 year bonds were typically traded as 1-10 year or 1-5 year blocks. And, with the first maturity coming due on 30th November 2012, some have opted to trade years 2-5 and 2-10. It should be noted these figures do not account for “double counting” arising from the inclusion of subsequent third party trades and transfers.

Exhibit 1 shows that the rate of acceptance and trading has slowed in the last 3 months when compared to the first 6 months of trading. However, it is our understanding that holders can still opt to accept the Government’s offer if they have not already done so. Holders of the Core Fund Series have until September 30th to accept the offer. Thus, we expect to see a pick-up in acceptance and trading as this date approaches since approximately 23.4 per cent have not yet accepted.

From what we have seen thus far, an insignificant number of CLICO bondholders have traded in their ZCBs with maturities within the 11-20 year range. The majority of the bondholders have chosen to hold on to these bonds in anticipation of the NEL 2. Based on our calculations, approximately 38.5 per cent ($4.04 billion) of the total $10.5 billion or 50.25 per cent of the $8.04 billion allocated have not yet cashed in their 1-10 year bonds. Please be advised that the figures presented are estimates based on feedback received.


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