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Sunday, May 23, 2010

CLICO (Bahamas) liquidator warns that the sale price achieved for Wellington Preserve would not be enough to satisfy creditors and policyholders

Main CLICO asset not enough for $14m 'gap'
Tribune Business Editor:

CLICO (Bahamas) liquidator has warned that he is unlikely to realise enough funds from the sale of the Florida real estate project, which accounts for 63 per cent of the insolvent insurer's assets, to cover a $14.394 million solvency deficiency, as he "tentatively" hopes to complete a sale of the firm's insurance policy portfolio this quarter.

Warning that the sales price achieved for Wellington Preserve would not be enough to ensure creditors and policyholders recovered 100 per cent of the sums owed to them, Craig A. 'Tony' Gomez, the Baker Tilly Gomez accountant and partner, said he would look to call in the $58 million guarantee provided by the Bahamian insurer's Trinidadian parent, CL Financial.

"The current real estate market in the US is very soft, and it is very unlikely that I will be able to realise a more than favourable price for the Wellington Preserve property," Mr Gomez said in his latest report to the Supreme Court.

"In light of these conditions, I have asked my Trinidad counsel to proceed with the call on the CL Financial guarantee."

The liquidator has been in lengthy negotiations with the Hines Group, a major international real estate development firm, for the sale of Wellington Preserve, but a deal appears not to have been concluded yet.

Maximising its sales price is vital to ensuring that CLICO (Bahamas) policyholders and creditors recover the sums due to them, but at the moment the insolvent Bahamian life and health insurer has total assets of some $50.865 million, with liabilities standing at $65.259 million.

The last financial statements for Wellington Preserve, which were unaudited, showed it having $127 million worth of investment property on its books in January 2009, but Mr Gomez said the property "valued on an 'as is' basis today is worth approximately $62 million".

Explaining that the project consisted of 80 residential lots and equestrian amenities, plus commercial sites, on a 523-acre site, Mr Gomez said: "It was previously estimated that the project required a substantial cash injection of a minimum $42 million to fund the development before it could be reasonably presented for sale. The financing is not yet in place, and in my opinion would not be an option."

Meanwhile, Mr Gomez said the selection of an insurer to whom CLICO (Bahamas) remaining life and health policies would be transferred was an ongoing process, with due diligence being undertaken.

"This process is tentatively expected to be completed in the second quarter of 2010," he added. It is still believed that Colina Insurance Company is the preferred acquirer.

As of January 31, 2010, CLICO (Bahamas) had some 17,707 policies with a collective surrender value of $23.302 million in force. The majority of these were 11,290 life policies, with a surrender value of $11.236 million, and 5,401 medical policies with a surrender value of $137,465.

"There was considerable attrition with regard to the number of in-force policies," Mr Gomez said, "which was attributed mainly to the non-deletion by CLICO of life policies tied to Citibank loans, totalling 5,873, which were no longer needed as Citibank's commercial operation had ceased doing business in the Bahamas.

"There was further attrition of policies due to the lapsing of some of the student protection plans, totalling 2,441. Based on my discussion with many of the policyholders cancelling their policies, the decision to cancel is as a result of the economic conditions that existed, and not necessarily as a result of CLICO's insolvency."

Between October 8, 2009, and January 31, 2010, CLICO (Bahamas) saw some 9,121 policies, with a sum assured worth $251.789 million, lapse.

Mr Gomez said he was reviewing and drafting responses to offers made to acquire 11 of CLICO (Bahamas) real estate assets - its former branch and sales offices, plus associated land parcels and the Centreville Medical Centre - which he wanted to raise around $5 million from.

The liquidator added that he would apply to the Supreme Court to settle the $360,786 mortgage balance owed to FirstCaribbean International Bank (Bahamas), in order to prevent any real estate assets he was selling from being encumbered.

May 21, 2010