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Bailout of Caribbean conglomerate may top $3 billion

The BRIEF behind CLICO and BAICO

* CL Financial hit by liquidity problems in global crisis

* Trinidad and Tobago took over firm’s management in 2009

* Company problems led to costly government interventions

By Linda Hutchinson-Jafar

PORT OF SPAIN,  (Reuters) – The cost of a government bailout of the Caribbean’s biggest private business conglomerate after its collapse during the global economic crisis is likely to rise to more than $3 billion, an official said on Tuesday.

Two years ago, the government of Trinidad and Tobago took over the management of CL Financial (CLF), whose financial troubles sent economic shock waves across the Caribbean.

The company, founded in 1993 by Trinidad-born entrepreneur Lawrence Duprey, once held billions of dollars in assets in a portfolio of more than 60 companies in the Caribbean, Europe, the Middle East and Asia.

But it fell into serious liquidity problems when the worldwide financial crisis set in, forcing Trinidad and Tobago, a leading Caribbean oil and gas producer, to inject $1.2 billion into the company.

The government will likely need to add another $2 billion to the bailout plan, said a source at Trinidad and Tobago’s finance ministry who requested anonymity.

CL Financial’s business interests included banking and financial services, insurance, energy, real estate, forestry, insurance, medical services and retail.

The company helped transform Duprey into a billionaire and one of the Caribbean’s leading entrepreneurs.

CL Financial’s collapse has had a large spillover effect on other countries in a region of predominately small and fragile economies that were hard hit by the global recession.

Some of its subsidiaries, which included the Colonial Life Insurance Company (CLICO) and the British American Insurance Company (BAICO), drew money from individuals and countries from across the Caribbean.

The insurance subsidiaries “took in funds via deposit-like investment products as well as through traditional insurance and pension products and channeled these to over-leveraged sister companies and real estate developments which sharply lost value during the global crisis,” the International Monetary Fund said in a report earlier this year.

The impact rippled across 15 Caribbean states, leading some governments to carry out costly government interventions in regional subsidiaries.

“The collapse of CL Financial has had a devastating impact on much of the Caribbean, and has been costly to governments, public and private pension schemes, bank and non-bank financial institutions and individuals,” the IMF said in March.

It has “placed at risk the assets of a wide range of depositors, investors and policyholders, including individuals, corporate and public pension schemes and financial institutions,” it said.

The IMF said the final financial cost could be as high as 10 percent of Trinidad and Tobago’s gross domestic product.

(Additional reporting and writing by Kevin Gray; Editing by Phil Berlowitz)

 

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The BRIEF behind CLICO and BAICO

* CL Financial hit by liquidity problems in global crisis

* Trinidad and Tobago took over firm’s management in 2009

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* Company problems led to costly government interventions

By Linda Hutchinson-Jafar

PORT OF SPAIN,  (Reuters) – The cost of a government bailout of the Caribbean’s biggest private business conglomerate after its collapse during the global economic crisis is likely to rise to more than $3 billion, an official said on Tuesday.

Two years ago, the government of Trinidad and Tobago took over the management of CL Financial (CLF), whose financial troubles sent economic shock waves across the Caribbean.

The company, founded in 1993 by Trinidad-born entrepreneur Lawrence Duprey, once held billions of dollars in assets in a portfolio of more than 60 companies in the Caribbean, Europe, the Middle East and Asia.

But it fell into serious liquidity problems when the worldwide financial crisis set in, forcing Trinidad and Tobago, a leading Caribbean oil and gas producer, to inject $1.2 billion into the company.

The government will likely need to add another $2 billion to the bailout plan, said a source at Trinidad and Tobago’s finance ministry who requested anonymity.

CL Financial’s business interests included banking and financial services, insurance, energy, real estate, forestry, insurance, medical services and retail.

The company helped transform Duprey into a billionaire and one of the Caribbean’s leading entrepreneurs.

CL Financial’s collapse has had a large spillover effect on other countries in a region of predominately small and fragile economies that were hard hit by the global recession.

Some of its subsidiaries, which included the Colonial Life Insurance Company (CLICO) and the British American Insurance Company (BAICO), drew money from individuals and countries from across the Caribbean.

The insurance subsidiaries “took in funds via deposit-like investment products as well as through traditional insurance and pension products and channeled these to over-leveraged sister companies and real estate developments which sharply lost value during the global crisis,” the International Monetary Fund said in a report earlier this year.

The impact rippled across 15 Caribbean states, leading some governments to carry out costly government interventions in regional subsidiaries.

“The collapse of CL Financial has had a devastating impact on much of the Caribbean, and has been costly to governments, public and private pension schemes, bank and non-bank financial institutions and individuals,” the IMF said in March.

It has “placed at risk the assets of a wide range of depositors, investors and policyholders, including individuals, corporate and public pension schemes and financial institutions,” it said.

The IMF said the final financial cost could be as high as 10 percent of Trinidad and Tobago’s gross domestic product.

(Additional reporting and writing by Kevin Gray; Editing by Phil Berlowitz)