As shareholders of local bank Cayman National Corporation Ltd. mull an offer by the Republic Bank Trinidad and Tobago (Barbados) Ltd. to buy up to 74.99 percent of their shares, the territory’s opposition legislators are calling for the “repayment” of a $20 million “investment” government made into a former Cayman National subsidiary in 2005.
Premier Alden McLaughlin and House Speaker McKeeva Bush, in turn, have accused opposition members of deliberately misrepresenting government’s financial ties to Cayman National in an attempt to derail its sale to the Republic Bank. Cayman National has also responded, clarifying that it does not have any liabilities to government related to the $20 million investment.
The bank’s potential sale faces a crucial step on Tuesday, when a meeting will be held for shareholders to vote on whether to remove a restriction on anyone owning more than 10 percent of Cayman National’s shares – something that needs to be removed if Republic Bank is to acquire majority ownership.
The dispute between the opposition, Mr. McLaughlin, and Mr. Bush stems from a settlement the United Democratic Party-led government reached in 2005 with then-Cayman National subsidiary Cayman General Insurance, which has since rebranded as Cayman First Insurance and no longer belongs to Cayman National.
At the time, Cayman General Insurance owed government an estimated $108 million insurance claim from damage arising from Hurricane Ivan. The claim was reduced to $70 million, with Cayman General Insurance paying government $50 million in cash and giving it a 24-percent stake in the company, valued at $20 million, in April 2005.
However, about seven months later, Cayman General Insurance sold 51 percent of its shares for only $8 million to another insurance company, the Sagicor Group.
A 2007 report by the Office of the Auditor General criticized the government’s deal with Cayman General, finding that the United Democratic Party administration did not get good value for its money. Based on the amount Sagicor paid to acquire 51 percent of Cayman General, government’s 24-percent stake in the insurer would only be valued at about $3.8 million – not $20 million – the auditor general found.
In a Friday statement, the opposition also blasted the deal, stating that it was made “under the direction” of then-Leader of Government Business McKeeva Bush and has been given implicit support by Premier McLaughlin due to his “lack of action.”
“This is another short-sighted decision made by McKeeva Bush, and clearly by the lack of action, supported by the Hon. Alden Mclaughlin and his PPM-led Unity Government,” stated Opposition Leader Ezzard Miller. “The Opposition would like to see McKeeva use the same amount of energy he is using to push for the port into getting the remainder of our CI$20 million investment back.”
Opposition MLA Chris Saunders also called for Cayman National to make sure Caymanians recoup their investment in Cayman General – even though the insurer is no longer a subsidiary of the bank.
“Since CNC’s board believes that ‘the Partial Offer is a good opportunity for Cayman National shareholders to realise the value of their investment in Cayman National,’ that they should do the right thing and ensure that the Caymanian people also realise their investment in their then subsidiary, Cayman General Insurance,” said Mr. Saunders, quoting from a recent statement made by Cayman National’s board of directors. “We want and demand that our investment is repaid once Cayman National Bank is swallowed up and is no longer Caymanian owned.”
It’s not clear how government would recoup its investment in Cayman General. In 2007, Cayman National sold the remainder of its shares to Sagicor, and in 2010 Sagicor sold all of its shares to the Bahamas First Group, which subsequently rebranded the insurer as Cayman First Insurance. Government still owns shares in Cayman First Insurance.
Cayman National CEO Stuart Dack released a statement on Sunday, clarifying that “neither Cayman National, nor any of its shareholders have any liability to the Cayman Islands Government in relation to CGI or any claim arising out of Hurricane Ivan.”
Several hours after the opposition released its statement, Mr. McLaughlin responded, saying that he was in the opposition when the settlement was reached in April 2005, and calling claims that he supported it a “deliberate untruth.” (Rather than claiming that Mr. McLaughlin supported the deal when it was struck, Mr. Miller’s statement is accusing the premier of currently supporting the settlement because of the “lack of action” by him and his current administration. However, Mr. Miller did not suggest any specific actions the current government should take to address the issue.)
The premier further accused the opposition of deliberately spreading misinformation in an attempt to disrupt the potential transaction between Republic Bank and Cayman National shareholders.
“These disingenuous statements are part of a growing pattern of false accusations made by the Leader of the Opposition and his colleagues. In this instance they appear to be aimed at derailing the sale of the majority of shares in Cayman National Corporation which will principally benefit Caymanians,” he said. “These deliberate attempts to continue to mislead the public on crucially important national issues such as this are deeply regrettable and unbecoming of the Leader of the Opposition and the members of the Legislative Assembly who appear to be blindly following his lead.”
The statement from the Premier’s Office added that regardless of whether the 2005 settlement with Cayman General made good business sense, it was a legally valid and binding settlement agreement. There is no outstanding loan and no money owed to the Cayman Islands Government by Cayman General, or its successor Cayman First Insurance or Cayman National Corporation, the Premier’s Office stated.
On Saturday, Speaker Bush responded to the opposition’s statement, too. Like the premier, Mr. Bush accused the opposition of intentional obfuscation.
“The release disingenuously attempts to correlate two completely unrelated transactions and in doing so to confuse and disrupt the potential sale of shares in Cayman National Corporation Ltd. by its shareholders, 75% of whom are Caymanian, following the receipt of a Partial Offer from Republic Bank Trinidad and Tobago,” stated Mr. Bush. “The Leader of the Opposition in his release intentionally misrepresents the settlement reached as a loan by the Government to Cayman General Insurance Company and calls for the current, mostly Caymanian Shareholders of Cayman National Corporation Ltd. to repay the ‘loan’ made to its previous subsidiary prior to the proposed occurrence of a sale.”
Mr. Bush also defended the settlement the then-government reached with Cayman General post Ivan.
“The agreement reached called for a cash settlement of CI$50 million within 30 days and the transfer to the Cayman Islands Government of 24% of the shares in Cayman General,” he stated. “This high level of prompt and financially sound decision-making by the Government, together with a substantial cash injection from the parent company of Cayman General guaranteed that all those Caymanians, residents and investors insured through Cayman General would receive a settlement of their claims. Some of the other insurance providers involved in claims in relation to Hurricane Ivan failed to settle their claims, to the detriment of many local people insured by them.”
Mr. Bush closed his statement by thanking God that Mr. Miller was not leading the territory during the time of Hurricane Ivan.
“That would have been another disaster of gigantic proportions!!!” he wrote to the Compass.
The recent statements by the opposition, Premier McLaughlin, and Speaker Bush do not mark the first time government’s settlement with the former Cayman National subsidiary has been debated by politicians.
In 2007, Mr. McLaughlin, who was the education minister at the time, blasted the deal as government contemplated selling its shares, which were then worth less than $3 million but were recovering some value at that time, according to Compass archives.
“It was a very poor business decision. It was the previous government who decided to compromise the claim with Cayman National Corporation.” Mr. McLaughlin said in February 2007, adding, “We think ultimately government ought to dispose of the shares. What we’re not going to do is compound one bad business decision by another. The shares, as we’ve been made to understand, are increasing in value. This government is not going to sell them on the basis of a fire sale.”
Government also contemplated selling its shares in 2011. At that time, then-Premier Mr. Bush made similar statements to the ones he released on Saturday. He defended the 2005 deal as a necessary measure to prevent the collapse of Cayman General, which he said would have had detrimental consequences.
“The committee ought to understand that, had the government not assisted the company, Cayman General, at the time , the disastrous result would have been that hundreds of Caymanians would have become bankrupt, without homes and loss of investments.” Mr. Bush said in 2011. “The then-government saved the day.”
The opposition’s statement on Friday estimated the current value of government’s shareholdings to be at $6.3 million. The opposition also stated that government has received a little more than $1 million in dividend payments to date. Mr. Saunders said at that rate, it would take nearly 100 years for government to receive enough dividend payments to equal its initial $20 million investment.