The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s deputy leader yesterday said it would be “a wonderful idea” for a bi-partisan House of Assembly select committee to probe Bank of the Bahamas’ ongoing woes, amid suggestions that politically-connected ‘bad’ loans had not been removed from its balance sheet.

K P Turnquest, speaking after Tribune Business exclusively revealed the identities of the 13 ‘bad’ borrowers whose loans were transferred to Bahamas Resolve, demanded greater transparency to deal with numerous unanswered questions that continue to surround this transaction.

He expressed concern over how Bank of the Bahamas had selected those specific loans for transfer from its balance sheet, and the costs involved in trying to collect on a $100 million portfolio whose associated liabilities had now been switched to the Bahamian taxpayer.

Meanwhile, Michael Lightbourn, Coldwell Banker Lightbourn Realty’s president and a Bank of the Bahamas shareholder, suggested to Tribune Business that both the bank and Government had avoided transferring any obvious politically-connected loans to Bahamas Resolve.

“I think the politically-connected loans were not the ones given to Resolve,” Mr Lightbourn said. “They were kept out of view of the public for obvious reasons.”

Suggestions that Bank of the Bahamas has numerous loans to politically exposed persons (PEPs) that are in default continue to haunt the bank’s restructuring efforts, even though these have been repeatedly denied by both the bank and the Government.

Mr Lightbourn, though, added that the dates on which the 13 ‘bad’ loans originated also dispelled the suggestion made by members of the Christie administration that it was the former FNM government who bore the greatest responsibility for Bank of the Bahamas’ problems.

Tribune Business reported yesterday that nine out of 13 (69 per cent) of the ‘bad’ loans were originated under the first Christie administration between 2003-2007, at a time when the Bahamian commercial banking industry was lending aggressively prior to the 2008-2009 ‘credit crunch’.

Mr Lightbourn also told Tribune Business that he had been informed by former Bank of the Bahamas Board members that some of the loans it issued never came before, or were approved, by the directors and the relevant committee.

“How’s that possible?” asked Mr Lightbourn. “Who authorised it?”

Further Tribune Business investigations shed more light on some of the borrowers whose loans have been transferred to Bahamas Resolve, and the assets which it will now have to try and collect on.

In the case of Philip Lightbourne, Premium Food Services and H&B Investments, sources said the security is the building (real estate) from which Phil’s Food Services operates from on Gladstone Road.

That property was originally owned by the brother of contractor Edward Penn, with Bank of the Bahamas financing its construction.

Phil’s Food Services is understood to have taken on that, and additional debt financing from the bank, when it took over the property.

Meanwhile, Kingsley Enoch Edgecombe Jr is the principal of King’s Realty, and was involved in the development and promotion of the upscale Serenity community in western New Providence in partnership with Martin Solomon.

It is unclear whether Mr Edgecombe and King’s Realty are still involved with Serenity, as recent advertising for that development has promoted it as a ‘Solomon Brothers Ltd’ project. Serenity is not affected or encumbered by the Bahamas Resolve situation.

Mr Edgecombe is well-known in the real estate industry as a realtor and developer, having been involved in the build-out of high-end communities such as Indigo, West Winds and Saffron Hills.

Tribune Business sources familiar with the Bahamas Resolve situation said the two mortgages the latter had inherited were secured on lots 71 and 72 at the Ocean Club Estates on Paradise Island, where the Edgecombes have a home.

And Dr Donald Leon Cooper was once a high-ranking government official, with multiple sources close to the Bahamas Resolve process confirming to Tribune Business he was previously director of the Bahamas Environment, Science and Technology (BEST) Commission, the administration’s environmental watchdog.

This newspaper’s contacts also confirmed that the loan to Lock Resorts Ltd and Brenda and Laverne Lockhart related to residential real estate located in the Love Beach area on West Bay Street, just off the road to Lyford Cay.

Three of Bahamas Resolve’s debtors are based in Grand Bahama - Kendal Robert Williams and Kendal Williams Construction Company; John H. Bain and Idena C. Bain, and their company, Bain Investments and Development; and Landstar Concrete Products.

Tribune Business was told that the Bains had focused on buying up distressed properties located near Freeport’s city centre in 2007-2008, renovating them and turning them into income generators by leasing out units to tenants.

Mr Turnquest, for his part, questioned Bahamas Resolve’s efforts to-date to collect on its portfolio and the costs associated with doing so.

“I’d have some concerns as to why these loans were selected as opposed to the loans of other poor and middle income families in similar situations, where they have built up equity in their homes and are about to lose them due to employment circumstances and no fault of their own,” the east Grand Bahama MP added.

“We need to have some transparency in regard to this Resolve issue. What’s been done to collect on the collateral to-date, and who’s funding that?”

Expressing concern that Bahamas Resolve’s collection efforts will require further spending by the Bahamian people (the Government), Mr Turnquest asked whether this would “result in a favourable and profitable outcome with regard to the guarantee given by the Bahamian people”.

Michael Halkitis, minister of state for finance, previously told the House of Assembly that the Government had issued a ‘Letter of Comfort’, rather than a guarantee, to underwrite the $100 million promissory note it issued to Bank of the Bahamas to fill in the hole left on its balance sheet by the Bahamas Resolve transaction.

However, the Opposition is disputing whether this relieves the Government of its obligation to cover any shortfall to Bank of the Bahamas, given that the main objective was to ensure the ‘bail-out’ did not appear in the already-strained public finances.

“I don’t know what it will end up being, but if you’re going to settle for less than face value, we need to be reassured that every reasonable and independent effort was made to collect,” Mr Turnquest told Tribune Business of Bahamas Resolve’s efforts.

He added that it would be “a wonderful idea” for a bi-partisan select committee of the House of Assembly to probe the Bank of the Bahamas situation, given that the Bahamian people faced liabilities at both ends - as the bank’s 65 per cent majority shareholder, and with respect to the Resolve transaction.

“We must not only be fair but be seen to be fair,” Mr Turnquest added. “It all comes down to transparency and accountability. We ought to have at least a clear position as to what is happening here, and more importantly why it happened.”

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.