‘Majority’ of toxic BoB loans ‘high end homes’

As of Friday, August 28, 2015

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Resolve’s chairman yesterday revealed that “the majority” of bad loans transferred from Bank of the Bahamas related to “high-end homes” and condominiums, rather than commercial credit as initially thought.

James Smith told Tribune Business that the company was “working on a number of cylinders” to recover the Bahamian taxpayer’s $100 million ‘investment’ in the 13 bad loans transferred from Bank of the Bahamas.

While these have long been billed by the Government as commercial loans to Bahamian businesses, Mr Smith said yesterday: “The majority of them are actually high-end homes and a couple of condos, and then of the course the collateral for business loans. It’s kind of a broad mix.”

It was not made clear whether these “high-end homes” had been offered as collateral for commercial loans to businesses, but the Free National Movement’s (FNM) deputy leader was one who expressed surprise about the revelations on Bahamas Resolve’s loan composition make-up.

“We’ve always been told these are business loans that were going bad,” K P Turnquest, who is also the FNM’s finance spokesman, told Tribune Business yesterday.

“It’s definitely going to be very interesting to see who owns these homes. Who are these people that are being given special protection?”

Bank of the Bahamas shareholders and taxpayers are likely to echo Mr Turnquest’s concerns and questions, although Mr Smith yesterday confirmed that Bahamas Resolve had managed to reduce its ‘bad loan’ portfolio by one.

Conceding that the sale of underlying real estate in this particular case had been set in train by the bank, the former Central Bank governor said: “We got rid of one of them.

“That was sort of in the pipeline before the formation of the company [Resolve] and us coming on board. We were able to get rid of one piece of real estate.”

Mr Smith also conceded that Bahamas Resolve was unlikely to recover the full value of the collateral assets, or the $100 million ‘promissory note’ that the Government injected into Bank of the Bahamas in a bid to restore it to financial health.

“I don’t think there’s any way to get dollar for dollar,” he told Tribune Business. “There’s going to be a gap between market value and whatever we realise. There’s going to be a gap between what the Government put into the bank and the provisions that came over.

“The market determines that. The Government made the decision once it handed over the promissory note. That set the upper limit, and we’re trying to rid the portfolio at the best price we can, or work the portfolio where Deloitte acts as a receiver for those with business connections.”

Mr Smith added that the primary objective of the Bahamas Resolve transaction was “to remove the toxic loans off the balance sheet” of Bank of the Bahamas, and ensure it was returned to compliance with regulatory capital ratios. The transfer of such liabilities to the taxpayer was thus a secondary consideration.

The Resolve transaction saw Bank of the Bahamas exchange a net $45.4 million worth of ‘bad’ commercial loans with the Government-owned Bahamas Resolve vehicle in exchange for $100 million worth of promissory notes (government bonds).

The benefits from that deal, which allowed Bank of the Bahamas to ‘write back’ $54.6 million in provisions and accrued interest, are already being eradicated by its continued losses.

If those $100 million worth of promissory notes are excluded, Bank of the Bahamas was barely solvent at March 31, 2015. Ignoring those notes, its total assets of $730.769 million exceeded $727.76 million in total liabilities by just $4 million.

Bank of the Bahamas’ $17 million-plus net loss incurred to March 31 has already wiped out the $54.623 million ‘retained earnings’ write-back from the Bahamas Resolve transaction. That is now overshadowed by the $57.348 million accumulated deficit sitting on Bank of the Bahamas’ books.

Mr Smith, meanwhile, added that solving the remaining 12 ‘bad loans’ was “an ongoing process” with Bahamas Resolve’s manager, the Deloitte & Touche (Bahamas) accounting firm.

“We took over 13 loans and we’re in the process of still having an evaluation done,” Mr Smith said. “The underlying collateral, in many cases the real estate, we need to have appraisals done to see what might be the market value.

“At the same time we’ve been receiving inquiries from people interested in purchasing. We’re working on a number of cylinders.”

Mr Smith suggested that Bahamas Resolve was in for a protracted ‘bad loan’ work-out, given that it was competing with the several thousand distressed properties that the commercial banking industry was seeking to offload.

And real estate transactions were often difficult to close, given the difficulty some buyer had in raising the necessary financing.

“It’s moving real estate in a sluggish market,” Mr Smith said.

DillyTree 9 years, 3 months ago

It will be very interesting indeed to see who owns these high-end homes! Wonder if we will every be told? As with everything else lately, this information never seems to find the light of day.

MonkeeDoo 9 years, 3 months ago

I would imagine all of these loans are registered as mortgaged properties to BOB. We just need an industrious search clerk to figure out who is whom. The 100 million is not the whole thing ikalikl, BOB is still holding onto another 200 mil in similarly bad condition. I know he is PLP to the bone, but he is also a professional man and one has to wonder how he could get his good name mixed up with this absolute shit. Former Central bank Governor ? . If you get a bank note signed by him take it in your bathroom and use it. Then take it to the Central Bank to get it changed. Put it in a plastic bag of course.

MonkeeDoo 9 years, 3 months ago

I would say that the former Bank Manager and Credit Committee Members should be criminally charged with gross negligence and conflict of interest. We have to start digging into this stuff. Mortgages are recorded. There must be a way to find out who the borrower and lender is and that will either smell good or bad. As public information I would imagine it could be published.

Well_mudda_take_sic 9 years, 3 months ago

James Smith is, and has always been, nothing but a dishonest spineless puppet for the PLP. Even Portia knew it! What an utter disgrace this man is. Why have the properties securing these loans (assuming there is some security) not been put up for public auction by now? It was after all, the public (we the Bahamian people) who ultimately got burned by the borrowers who are undoubtedly well connected political friends and business cronies of our corrupt to the core Minister of Finance and PM, Perry Gladstone Christie aka Vomit! The fact that James Smith has not named the borrowers or their beneficial owners by now says only one thing to the Bahamian people: Jame Smith is nothing but an inside crony of Christie who will do anything to continue sucking on the public purse to buttress the sucking he does from the Greek's pocket book in addition to the pension he should be made to forfeit as a disgraceful ex-governor of the Central Bank who did whatever he was told to do by his corrupt Minister of Finance and be damned the harmful consequences to Bahamians at large!

Reality_Check 9 years, 3 months ago

The loans of the 13 borrowers totalling $100,000,000 that were transferred from Bank of The Bahamas (BOB) to the Bahamian company named Bahamas Resolve are not subject to bank secrecy and should have long ago been disclosed to all of the hardworking honest Bahamian taxpayers who were forced by Christie to bailout BOB as a result of these loans having been defaulted on by his political friends and business cronies. No doubt James Smith will make sure that any security held for these bad loans ends up being acquired by other political friends and business cronies of Christie at rock bottom bargain basement prices! James Smith has never been able to muster up the courage or strength necessary to draw a line in the sand when it comes to doing whatever dirty work Christie asks of him. Spineless Smith has always been a facilitator or enabler of the corrupt activities of the Christie-led PLP government.

Baha10 9 years, 3 months ago

For a mere few "hundred" dollars The Tribune could commission their own searches of the Registry of Records and within a week have the information that the Public so desperately seeks, the Newspaper sales from which would easily outweigh the initial cost.

Well_mudda_take_sic 9 years, 3 months ago

There is a high probability that the 13 loans in question were never properly recorded as having been legally transferred from Bank of The Bahamas (BoB) to Bahamas Resolve and this is something the Bank Supervision Department of The Central Bank and the external auditors of BoB should be looking into.

Zakary 9 years, 3 months ago

James Smith told Tribune Business that the company was “working on a number of cylinders” to recover the Bahamian taxpayer’s $100 million ‘investment’ in the 13 bad loans transferred from Bank of the Bahamas.

This article is depressing...high end homes!?
I must be dreaming.

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