The matter of interest is at the very centre of the collapse of CL Financial and the subsequent $25 Billion bailout, which has been conducted on terms deeply inimical to the Public Interest.


The mis-match between the high cost of CLF’s borrowings and the low return on its varied investments caused that group’s collapse. The bailout was agreed to commit an undefined quantity of scarce Public Money to rescue those investors at the riskiest end of the financial market, most of whom had invested in short-term Annuities. Of course the Executive Flexible Premium Annuity (EFPA) was an insurance product approved as required by law, it would be untrue to attach any other meaning to those investments which we now know to have totalled about $11 Billion. I have always thought of Annuities as long-term investment products in the 15-20 year range, but CLF redefined terms we had thought were settled.

But the bailout itself, apart from refunding the capital of those riskiest of investors, went several steps further –

  • Term – there was no fixed period for repayment;
  • Interest – was only charged on the first $5.0 Billion at 4.75%, with no interest charged on the other repayments to settle CLF’s liabilities.

Those details are disclosed in the MoU of 30th January 2009, the CLF Shareholders’ Agreement of 12th June 2009 and CLICO’s 2015 audited accounts. That audit, at its 32nd note, stated that 4.75% was charged on the first tranche of $5Bn which was lent in 2009.

The Weighted Average Capital Cost of those borrowed sums of Public Money, is less than 1% – 0.95% actually, by my calculations.

The cost to the State of the interest and financing of this bailout has been in excess of $4.83 Billion. Those costs escalated from $30,640,697.82 per month between 30th January 2009 and 30th April 2016 to $85,895,308.99 per month between 30th April 2016 to 30th June 2018. Over one Billion dollars a year in interest, why? That is 2.8 times more in monthly interest charges.

These are the supporting details for my assertions, drawn from the official record or formal correspondence.

  1. The cause of the CLF collapse

    Ewart Williams, Governor of the Central Bank TT. Photo courtesy Trinidad Guardian.
    Ewart Williams, Governor of the Central Bank TT

    When the CLF collapse was announced on Friday 30th January 2009, the then Governor of the Central Bank, Ewart Williams, specified as one of its main causes –

    “…An aggressive high interest rate resource mobilization strategy to finance equally high risk investments, much of which are in illiquid assets (including real estate both in Trinidad and Tobago and abroad)…” (emphasis is in the original statement).

  2. How large were CLF’s high-interest borrowings?

    Winston Dookeran

    Winston Dookeran’s inaugural Budget Statement, on 8th September 2010, explained that

    “…The number of traditional, long term policyholders affected by this crisis, covering pensions, life and health insurance, is around 225,000 persons and accounts for $6 billion in liabilities.

    CLICO also sold short term investments, which were in substance, deposit accounts with 3-5 year durations, and which earned interest rates significantly above market rates. The company also guaranteed the liabilities of a mutual fund that also paid above market interest rates with terms similar to the short term investments. There are approximately 25,000 customers holding these short term contracts, and the liability to this group is in the region of $12 billion. It was from these short term contracts that CL Financial financed many of its large acquisitions and speculative investments which have fallen tremendously…” (pg 9)

  3. What has the State paid in interest and financing costs to fund the bailout?

    According to the letter from the Chief State Solicitor of 19th November 2018, that sum is $4,830,506,986.33, as at 30th June 2018.

  4. How much interest will CLF have to repay on the bailout?

    The Weighted Average Cost of Capital (WACC) is a metric used to show what is the average cost of the capital raised by a company. It is a vital tool in strategic management and allows the company’s leaders to make effective borrowing decisions. If we apply this approach to the CL Financial bailout the answer is instructive. So, one can assume that the total advanced is $25Bn with only 4.75% interest on the first $5Bn and no interest on any more of the Public Money advanced to CLF. Accordingly, given that only 20% of the CLF bailout pays interest at 4.75% and the other 80% is at zero-percent, the WACC is .95%. Less than 1% is the interest due from CLF.

  5. How does the 4.75% interest rate compare?


    The Central Bank’s Handbook of Key Economic and Financial Statistics for the period 1955-2013, at pg 113 in table F11.1, discloses that the Weighted Average Loan Rate charged by commercial banks was 11.19% in 2008 and 11.80% in 2009. Which means that the average business borrowing money from a commercial bank in T&T at that time would have been paying over 11% in interest. At the same time, the State was charging the largest conglomerate in the Caribbean less than half that rate, only 4.75%. Even if one accepts that some interest was charged on the first $5.0 Billion in early 2009, the rate was a scandalously low one, when one considers that this was a distressed company approaching the lender of last resort.

The silence of our leading economic and financial commentators and public officials on the interest issue is a striking indictment of prevailing professional standards. Public Money needs to be man-aged and accounted for to a higher standard than private money. After all, it is paid involuntarily, via taxation. Just imagine any bank or credit union making a huge loan at virtually-zero interest with no set date for repayment.


5 thoughts on “CL Financial bailout – A Matter of Interest

  1. Afra,

    Excellent piece, but I have a few issues that I’ll be ventilating that put me somewhat at odds with your work. I’ll be writing about this as soon as I conclude a series on another matter within a few weeks. Here are the main points that I’ll be developing:

    1. Only 5 billion or thereabouts was advanced to CLICO, so only that sum attracted interest payments, albeit at too low a rate 2. Most of the other money taken from the Treasury was used by the administration to purchase the rights of policyholders/depositors. Those rights were purchased at a discount below their face value without the disclosure of relevant financial details i.e. we moved from a bailout to speculative acquisition of financial instruments. We should distinguish between the two phases and account for them separately. Should any administration even be permitted to engage in such financial speculation? 3. The government has now used the very same CLICO assets through NIF to garner investment at up to 8% tax adjusted interest. We have never had a breakdown of interest rates paid by CLICO to its clients but none of the many policyholders I spoke and worked with had more than an 8% return. We need that data in order to properly evaluate the true exposure of CLICO at the time of collapse. Given the same assets, why is a rate of 8% now considered not risky when that very rate was blamed for the collapse?


  2. this reminds me of Kenya. Literally cut and paste. These criminals will simply use the state to enter ridiculous schemes which are not viable but viability was never the question. It’s about funneling money into their pockets. They can go into the bond market or to international lending makes no difference its all about two things. Funneling money and secondly by the time the shit hit the fan they long gone and know nothing is going to happen to them.

  3. I am reading these comments by AWA and am now confused. Is it that the state is earning interest off the assets acquired from CLICO and therefore that justifies the reduced rate of interest charged for the 4.8 billion bailout? Thus the state has really re-invested public funds in this “risky” business for the citizens and is hoping to make much money off these assets? Exactly what have they acquired and for what sum? at what rate?

  4. Excellent information from your analysis Mr Raymond. It was well known CL was taking funds and paying higher than the market. They were also making investments over Cost and no reasonable return to cover the cost of funds. Also the Management of CL and CLFinancial were not managed and held accountable for their actions by the chief. The same applied to the HCU taking in short term funds, paying high interest rates and lending long with low interest rate. A recipe for disaster. We the people of Trinidad and Toabgo are paying dealry for the mismanagement of these institutions. When would someone be held for this fraud and mismanagement. By a side note: It took almost ten years to complete the legislation to fix this problem but for some unknown reason the bill has not been accented by the president and therefore not law. The government is playing with fire again. Operationalize the Insurance Act now. The people of Trinidad and Tobago needs protection from unscrupulous business men and managers. God help us all!!!

  5. Are these the people who are educated, elected and endeared by the masses of T & T?
    Will 2020 bring vision?
    Can truth exist without violence?

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