The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Resolve’s chairman yesterday said he has still not been asked to remove more bad loans from Bank of the Bahamas, and has yet to recover any of the distressed assets currently on his books.

James Smith told Tribune Business that Bahamas Resolve, which was key to the BISX-listed bank’s $100 million taxpayer ‘bail out’ in October 2014, likely faced a long ‘work out’ period to recover the net $45.6 million worth of bad commercial loans already transferred to it.

Banking industry insiders have long been predicting that more non-performing loans - possibly several hundred million dollars’ worth - will have to be removed from Bank of the Bahamas’ balance sheet to restore it to full financial health and profitability.

But, with the six-month extension for publication of the bank’s 2015 year-end results set to expire tomorrow, Mr Smith said neither he nor Bahamas Resolve had been “formally approached” to take on more bad loans.

“No, we haven’t been,” Mr Smith responded, when Tribune Business raised the issue. “I heard some talk, but there was nothing official.

“I’m still working through what we’ve got. The whole market is flooded, so it doesn’t look like we’ll be moving too many properties any time soon.”

Bahamas Resolve and its manager, the Deloitte & Touche (Bahamas) accounting firm, have begun advertising several high-end residential properties in the Paradise Island and Lyford Cay areas for sale.

These were used as collateral for the distressed loans obtained by the 13 delinquent borrowers transferred to Bahamas Resolve, and the Paradise Island properties featuring in the newspapers likely belonged to former King’s Realty principal, Kingsley Edgecombe.

Tribune Business previously revealed that Mr Edgecombe obtained $9.365 million in credit from Bank of the Bahamas that was secured on his Ocean Club Estates lots.

“We figured the high-end properties might attract buyers more readily,” Mr Smith told Tribune Business.

“We’re in a tough market. Until the economy rebounds generally, and the real estate market, there are a lot of willing buyers but it’s having the means. The banks are not letting up on it so easily.

“There’s been interest in a couple of our properties, with people calling in and wanting to see them, but it’s a long way from closing a deal.”

Mr Smith conceded it was likely that Bahamas Resolve would be called upon again if Bank of the Bahamas’ “balance sheet deteriorates to the point where it needs a further injection of capital”.

Such a scenario, he added, would see the same ‘bad debt’ transfer mechanism “to prop up” the BISX-listed bank.

Mr Smith suggested Bahamas Resolve might, as an alternative, be asked to take over administration of the Government’s troubled Education Loan Guarantee (ELG) portfolio, which is currently being handled by Bank of the Bahamas.

He emphasised, though, that the Government had yet to approach Bahamas Resolve on either potential solution.

Evidence that Bank of the Bahamas, which is 65 per cent Government owned, remains in deep financial trouble came in yesterday’s newspaper, which revealed that the Christie administration has again used taxpayer monies to pay the $984,750 dividend due to the bank’s preference shareholders.

Combined with the two $1.1 million dividend payments made to the preference shareholders on July 21, 2014, and January 9, 2015, respectively, the Government has now used $3 million in taxpayer funds over the past 17-18 months to pay Bank of the Bahamas’ preference shareholders what they are due.

The Government’s plans to restore Bank of the Bahamas to financial sustainability remain a closely-guarded secret - if they exist at all.

The institution’s 35 per cent minority shareholders remain completely ‘in the dark’, amid suggestions that the Christie administration is entertaining approaches from potential buyers in both the Bahamas and wider Caribbean.

Multiple Tribune Business sources have said that National Commercial Bank of Jamaica (NCB) has been assessing a possible Bank of the Bahamas acquisition, although observers believe the latter’s strained financial position - and need for a capital injection worth several hundred million dollars - would put off most buyers.

NCB, though, is majority controlled by Michael Lee-Chin, who built Canada’s largest mutual fund management company. Mr Lee-Chin purchased NCB when it was in a similar state to Bank of the Bahamas today - financially weak, and government owned.

“I heard National Commercial Bank (NCB) was back in the market looking at it,” one Bahamian banking industry source said of Bank of the Bahamas.

“Republic Bank from Trinidad had kind of stepped back. I know the Government was looking to inject more cash into the bank, although not how much, or if there’s going to be a second phase of Bahamas Resolve.”

Another contact with close Government connections also confirmed they were aware of NCB and Republic Bank’s interest in Bank of the Bahamas.

The Resolve transaction saw Bank of the Bahamas exchange a net $45.4 million worth of ‘bad’ commercial loans with the Government-owned SPV 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 have 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.

Investor losses had increased by 73.4 per cent year-over-year to end-March 2015.