Former policyholders of CLICO life insurance, who have been persuaded to accept Government bonds instead of thousands of dollars owed to them, may not have to wait another 15 years before receiving at least some of their long-anticipated cash.
This is because directors of the company’s court-ordered successor, Resolution (Res) Life Assurance Company Ltd have been working feverishly to source investors willing to purchase portions of the bonds, chairman Tony Hoyos has revealed.
He told Barbados TODAY that just last week, the Central Bank endorsed a procedure never before attempted in Barbados known as ‘strip trading’, which would enable bondholders to subdivide and sell parts of their bonds for immediate cash.
Instead of purchasing the entire 15-year bonds, investors and ‘ordinary’ Barbadians could purchase the first five to seven years. Bondholders would likely sell their bonds at a price just below market value and the buyers would receive handsome annual interest payments on their new bonds.
Since then, Hoyos has been working closely with Government Senator Rawdon Adams to gauge the interest of financial institutions including credit unions, who may be interested in purchasing the bond strips.
“If you are the owner of 10,000 dollars in bonds you might accept 85 cents on the dollar for the first five years. So it broadens the opportunities for sales to the holders and broadens the opportunities for investment for those who have funds sitting down that they cannot otherwise invest to make a good return,” Hoyos explained.
“If we get offers we will then communicate to the people we have issued bonds to see if they would like to accept that offer and we will arrange to package it for them so they don’t have to interface directly with the institutions…because it is a new process and not everybody will feel comfortable enough to help themselves,” Hoyos explained.
ResLife’s directors believe working-class Barbadians who purchase the bonds could also benefit from interest rates, which would be much higher than those offered by commercial banks, making the initiative a ‘win-win’ situation for investors and former CLICO policyholders.
“The banks are offering interest rates between zero and one-tenths of a percent. So the rates are very low, but people have money sitting in the bank and have nowhere else to invest it right now. So this is another potential investment opportunity or alternative for them instead of leaving the money in the bank.
Hoyos however could not give a date for when the new arrangement would commence, as it would depend on the interest of investors.
“There is no timeline on it. These bonds are in existence for 15 years, so if an institutional buyer says ‘I am not interested now but I could be interested in three of four months or a year’, at least it is available for them to exercise that option.
“We would like to round up several millions of dollars within the next few months if it is possible. I cannot guarantee that it’s going to be possible. We have got to find willing buyers. So that’s why it’s important for us to talk with potential buyers about what they can invest… we hope it takes place within a few months,” said the chairman.
Back in May, Prime Minister Mia Mottley announced some life policyholders would get up to $20,000 in cash and their remaining money due to them in 15-year bonds to be paid out quarterly after announcing taxpayers would foot the bill for the outstanding money owed hundreds of Barbadians by the now defunct CLICO.
The total value of bonds being issued by RES Life equals more than $300 million or 3.4 per cent of GDP and has left policyholders thousands of dollars short on their own investments.
“The odds are high that a lot of policyholders will be interested in selling some or all of their holdings. If they had to sell all 15 years at once, the potential buyers would be a lot smaller than if they can sell it in slices … What we are doing is opening up the market to match investors and owners of bonds in a way that is not possible in Barbados at this time” said Hoyos.
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