The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Liquidators for Gulf Union Bank (Bahamas) are preparing to pay a further “10 cents on the dollar” dividend to the now-defunct institution’s creditors, having returned a total $7.456 million to-date.

Accountants Raymond Winder and Graham Garner, in a September 12, 2012, letter to Gulf Union’s depositors/creditors, said a Supreme Court order on how they were to treat unclaimed deposits had paved the way for them to make a fourth distribution.

Given that $0.30 on the dollar has already been returned to Gulf Union depositors/creditors, this latest dividend will come close to meeting the liquidators’ forecast that they will recover $0.45 per cent out of every $1 owed.

The fourth dividend will take recovery to 40 per cent, or $0.40, out of every $1 owed. This is what Gulf Union’s major depositors and creditors will reclaim to-date, as those owed $50,000 or less were covered by the Deposit Insurance programme.

In their letter, Messrs Garner and Winder warned that hitting the $0.45 target depended on further loan recoveries and whether “a significant amount of presently unclaimed deposits” are claimed and agreed.

Noting that they had recovered $11.319 million in loans and overdrafts as at December 31, 2011, the accountants said this was a major improvement over the $6.552 million in such assets identified when Gulf Union went into court-supervised liquidation in 1998.

Due to the recovery effort, Messrs Winder and Garner said sums due to depositors and other creditors had fallen by $9.498 million between 1998 and 2011.

“This is as a result of distributions on agreed claims totalling $7.456 million, and claims that have been rejected,” they added.

Gulf Union’s solvency deficiency had also dropped, falling from $23.846 million to $18.118 million over the same period.

As for the prospects for further recovery, Messrs Winder and Garner said: “None of the loans outstanding at December 31, 2011, are performing under the terms of their original agreement.

“Four loans with an estimated value of $85,338 are making payments and we hope these will be fully repaid in time so that we do not have to resort to eviction and advertising for sale.

“A further four loans with an estimated value of $85,388 are not making payments, and we are in various stages of seeking eviction, valuing and advertising for sale. The market is not good for sales of these types of property at this time.

“Against these eight loans we have made a general provision of $25,313, being 6 per cent of their current book value.”

Apart from these eight loans, Messrs Winder and Garner said they were continuing “to pursue some 10 other debtors”.

They added: “These debtors are not paying and we are pursuing necessary legal action to attempt to place ourselves in a position to advertise and sell the underlying security.

“They include two loans where, if we are successful, we could receive significant recoveries well into seven figures.”

The two liquidators, in their last report to the Supreme Court, gave details on these two loans. They include a $5.492 million loan balance that was secured on 1,407 acres of Cat Island real estate, and a $3.78 million judgment plus interest against another borrower, having traced real estate belonging to one defendant.

In the Cat Island case, they said: “The balance on this debt at December 31, 2010, was $5.492 million, and the security has been valued at well in excess of this sum.”

The Gulf Union Bank insolvency, and subsequent liquidation, has been a long-running saga dating back to 1998, and many Bahamians have forgotten the events that led to its collapse, apart from those who lost significant savings.

While the liquidation has been protracted, Messrs Garner and Winder appear to have achieved a decent recovery for creditors given the circumstances.

Among the key details revealed in the last report were the doubts expressed by the liquidators about the feasibility of attempting to collect almost $17 million worth of judgments obtained against Gulf Union’s two immediate past owners.

“Whilst we have a default judgment against the Al Thani Group in the amount of $12.5 million, and earlier judgments against the Quoreshis’ for $4.2 million, we are not yet satisfied that the significant amount of expense required to pursue the defendants’ assets would be justified by any ultimate recovery,” the liquidators warned.