The Tribune

By NEIL HARTNELL Tribune Business Editor THE Bahamas Mortgage Corporation's (BMC) 'going concern' woes are "not good news" for 70 per cent of Bahamian contractors who rely almost solely on the residential housing market for their business, the Bahamian Contractor's Association's (BCA) president told Tribune Business yesterday. Acknowledging that the BMC's current inability to finance any further low-cost housing subdivisions developed by the Government's Ministry of Housing could further delay recovery in a sector hard-hit by the recession, Godfrey Forbes said that all was not lost for Bahamian contractors. The Government was doing its bit to keep Bahamian medium-sized and large contractors busy, the BCA president said, having received bids for the Abaco and Exuma hospital contracts within the last week. And all was not lost when it came to the housing market, Mr Forbes noting that it was not 100 per cent dependent on the BMC for homeowner financing. Credit unions and the Bahamian commercial banks, together with private sector subdivision developers and homeowners, also represented strong business sources for Bahamian contractors. Still, the BCA president acknowledged that the BMC's present financial predicament would have a trickle down effect that negatively impacted smaller Bahamian contractors reliant on residential housing developments for work. "Not having the funds to go ahead and fund projects for residential owners will definitely impact smaller contractors in the country," Mr Forbes told Tribune Business of the BMC. "Not having the funds to deal with it is not good news. That's definitely reason for concern. "Some activity in the housing industry would definitely be something we'd like to see, because it would represent a relief for the smaller contractors in the country, who represent 70 per cent of the market. It is not good news when you consider that housing constitutes a great proportion of the business for smaller contractors. "When you find that the Government, which is the largest developer of affordable homes, does not have the capital to go ahead and fund the Ministry of Housing, that is not good." Mr Forbes recalled the meeting held between the BCA and former minister of housing, Ken Russell, just prior to the latter being fired from the Cabinet by Prime Minister Hubert Ingraham. The ex-minister was unable to give the construction industry any idea of when the next Ministry of Housing subdivisions would be developed. "We were in a meeting with the former minister for housing, trying to find out what was on tap for the affordable homes coming on stream, and at that point in time he couldn't give any definitive answers. This was a few days prior to him demitting office," Mr Forbes told Tribune Business. "Since the current Minister of Works took on that portfolio, we've not been able to engage in any further talks with him at this point." Tribune Business reported on Tuesday how the BMC's existing policy underestimates loan loss provisioning by more than $71 million, with its chairman unveiling an ambitious plan to cut delinquencies by almost half to 20 per cent within two years. Dr Duane Sands contrasted the BMC's existing loan loss provisioning policy with that required under International Financial Reporting Standards (IFRS). Under the former, the 100 per cent state-owned Corporation had total loan loss provisions of just $1.25 million, giving it total assets of $229.535 million and total liabilities of $156.976 million This gave the BMC some $72.559 million in net assets. Yet, under IFRS standards, the BMC's true loan loss provisions should be $72.439 million. This resulted in total assets of $158.346 million, and total liabilities of $156.976 million, giving the Corporation a net asset position of just $1.37 million. Dr Sands said the BMC had consistently financed its operations with debt, in the form of bond issues, as opposed to relying on its own capital and cash flows generated by mortgage repayments. Yet while the BMC had managed to reduced its loan portfolio arrears from 42.5 per cent in February 2010, these remained extremely high at 39 per cent as at end-December 2011, explaining why it could not fund its operations from cash flow. Meanwhile, the BCA president said the outlook was better for medium and large-size Bahamian contractors. Mr Forbes added that the Government had received bids on the Abaco and Exuma hospital construction contracts within the last week.