The Tribune

The Bahamas has ‘dropped off the map’ among traditional bank lenders to the hotel/tourism industry, with this nation failing to feature among the top 10 Caribbean destinations for new lending.

The KPMG accounting firm’s 2015 Caribbean Financing Hospitality survey, which has been seen by Tribune Business, revealed that the likes of St Lucia, Antigua, Barbados, Jamaica and even Haiti are seen as a ‘better bet’ for hospitality industry lending by the global banking industry.

This, at first glance, appears to have massive implications for the Bahamas and both existing hotel expansions and future foreign direct investment (FDI) projects, which rely heavily on debt financing. For the KPMG survey suggests that the credit supply pipeline appears to have dried up.

However, other findings from the survey mitigate these concerns somewhat, as the Bahamas does figure among the top 10 Caribbean countries for new hospitality lending among non-traditional financiers.

The Bahamas ranked equal second with the Dominican Republic among non-bank tourism/hotel lenders, with around 17 per cent of respondents to the KPMG survey rating this nation as their favourite lending destination.

Only Turks & Caicos was rated more favourably, with over 20 per cent of non-bank lenders rating it as the top Caribbean nation for hospitality lending. Non-bank lenders include the likes of private equity firms, mezzanine investors and investment/hedge funds.

KPMG executives did not respond to requests for comment before last night’s press deadline, but the fact the Bahamas seems to have ‘fallen off the radar’ among banks that finance this nation’s largest private sector employer will be concerning for both the hotel industry and the Government.

Only Antigua, Barbados, Jamaica, Trinidad & Tobago and Turks & Caicos appeared in the ‘Caribbean top 10’ among both bank and non-bank hospitality industry lenders.

KPMG, in summarising the survey’s findings, said lenders were “all over the map” in mentioning 15 different Caribbean nations as their most favoured destination for resort project financing.

The accounting firm found that non-bank lenders were much more “bullish” on the hotel/tourism industry’s prospects, registering an 8.17 out of 10 reading on the report’s confidence index.

Traditional bank lenders, by comparison, were down at a 6.5 out of 10 confidence level.

“The reasons for the increased confidence levels appear to be numerous but include growth in the US economy, the main feeder market for the Caribbean, improved airlift into the region and a general feeling that those existing operators who have survived the recession are now more robust and well positioned for future growth,” KPMG said.

“Do these results mean that the Caribbean tourism industry is booming with readily available financing? If only it were that simple. These levels of confidence are encouraging but, for the time being at least, renewed confidence does not appear to be translating into readily available capital.

“None of the banks surveyed think it’s a perfect time to lend in the Caribbean and 13% actually stated they are currently not interested in lending in the Caribbean. Half of our bank respondents considered lending in the Caribbean to be high risk/high return and that they would need to proceed cautiously,” KPMG added.

“Non-bank providers again showed more optimism. Seventeen per cent of them think it is a perfect time to lend in the Caribbean, and 50 per cent of them would critique a Caribbean lending opportunity like any other project.”

KPMG added that while confidence and liquidity had increased, the supply of actual credit to the industry had yet to do so.

It said the high level of loan delinquencies among the three Canadian-owned banks - Royal Bank, CIBC and Scotiabank - were a major factor driving this situation.