The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE “millions” in bad loans recovered to-date by Bahamas Resolve actually resulted from prior work by Bank of the Bahamas before their transfer, the former’s chairman said yesterday.

James Smith told Tribune Business that the asset recoveries, lauded by Prime Minister Perry Christie in the House of Assembly on Wednesday, had come from processes set in motion by the BISX-listed bank before it transferred the 13 ‘toxic’ loans to Bahamas Resolve.

Referring to “the heat of the moment” in the House of Assembly, the ex-state finance minister told Tribune Business: “What could have been alluded to, and you must bear in mind, is that the loan book transferred over was being worked on continuously.

“It did not stop because of the high profile exchange [the transfer from Bank of the Bahamas to Bahamas Resolve] in the press. That process has gone on with all of their loans, and some them were resolved before the transfer.”

Mr Smith, using a hypothetical example, said some of the $100 million in ‘bad’ commercial loans transferred to Bahamas Resolve could have been secured on real estate.

He explained that a buyer for this real estate collateral could have been found, and a sales process initiated, when the loan belonged to Bank of the Bahamas.

But the sale may only have been completed after the loan, and underlying security, was transferred to Bahamas Resolve - meaning that the recovery proceeds would accrue to it and the taxpayer, not the bank and its public shareholders.

Bradley Roberts, the PLP’s chairman, on Wednesday night also suggested that Bahamas Resolve had recovered $10 million in troubled loans inherited from Bank of the Bahamas - and claimed just $90 million remained outstanding.

However, Mr Smith’s comments yesterday indicate the story is more complex than both the Prime Minister and Mr Roberts have allowed for in their public statements.

And, given that processes initiated by Bank of the Bahamas appear to have resulted in some sort of ‘asset recovery’, it is possible that some among its 35 per cent minority shareholders will query why the loan(s) in question should so speedily have been transferred to Bahamas Resolve.

And it is possible a case could be made that such ‘recovery proceeds’ accrue to Bank of the Bahamas, not Bahamas Resolve and the Government/Bahamian taxpayer.

Raymond Winder, managing partner of Deloitte & Touche (Bahamas), the accounting firm engaged to collect the ‘bad’ loans on Bahamas Resolve’s behalf, declined to comment when contacted by Tribune Business.

However, a source close to developments, speaking to this newspaper on condition of anonymity, confirmed Mr Smith’s explanation.

“They [Bank of the Bahamas] were able to do something before Resolve got involved,” the source said. “One of those loans, in particular, had a piece of property that was for sale. Part of it they had in the pipeline.”

They added that Bahamas Resolve and Deloitte & Touche were currently determining exactly what they had inherited, and were assessing all documentation relating to the 13 loans transferred from Bank of the Bahamas in exchange for $100 million worth of government debt (promissory notes).

In particular, they are assessing whether the security for the loans will enable them to potentially recover the full value, or if they have collateral that is substantially less than the $100 million total.

The source also revealed that Bahamas Resolve, and Deloitte & Touche, had halted some of the other loan recovery processes initiated by Bank of the Bahamas because they were considered “a bad deal”.

Tribune Business also understands that Bahamas Resolve and its directors, plus Deloitte & Touche, are anxious that the loan recovery process does not become a ‘political football’. But, between the Government and Free National Movement (FNM), that already appears to be happening.

Mr Smith, meanwhile, confirmed that Bahamas Resolve now had two other directors besides himself, although he declined to name them.

“The Board has not been completely peopled yet,” he added.

While the company has provision for a maximum five directors, Mr Smith said the current three were “sufficient” for Bahamas Resolve’s Board to take decisions and pass resolutions.

“The company has been formed, the [loan] assets transferred to the company in exchange for the notes, and the accounting firm Deloitte has been engaged,” Mr Smith, also a former Central Bank governor, told Tribune Business.

“Once we have sight of the company, it’s mandate and Articles of Association, that gives us the parameters of how the company operates. Those we now have, so we can go to work.”

All the documents and indemnification for Deloitte’s hiring had been completed, and Mr Smith said Bahamas Resolve would now have to “decide on the strategy; whether we go for the low hanging fruit” rather than the larger ‘bad’ loans that carry greater problems.

He explained that Deloitte’s mandate allows it to take over the defaulted business borrowers, either as liquidator or receiver.