The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An insurer yesterday said it will “get a bigger bang for the buck” from investing $3.45 million in a joint venture, also involving its chairman, which aims to alleviate the Bahamas’ bad mortgage crisis.

Anton Saunders, RoyalStar Assurance’s managing director, told Tribune Business that the investment in Ascendancy Bahamas’ Class A preference shares offered greater potential returns than any available alternatives.

He confirmed that Ascendancy Bahamas, which has been created to buy distressed mortgage loans from Bahamian commercial banks at deeply-discounted prices, is still awaiting the necessary approvals from the Government.

Tribune Business revealed last year how Sir Franklyn Wilson, RoyalStar’s chairman, was in talks with a Mexican company to form a joint venture, Bahamian-domiciled partnership that would bear the latter’s name.

Its creation has been confirmed by RoyalStar’s newly-released financial statements for the year to end-2015, which show the Ascendancy Bahamas investment as one of several deals involving the insurer and related parties.

When asked why there had been such a sudden increase in RoyalStar’s related party investments in 2015, Mr Saunders said the property and casualty insurer believed these offered the best return opportunities.

“From our related party transactions we get a better bang for the buck. There’s not many investment opportunities out there,” he told Tribune Business.

“Ascendancy provides an opportunity to expand our investment portfolio and, once the official permits are granted by the Government, we believe we can help out the Bahamas with its distressed properties.”

Ascendancy Bahamas’ business model involves purchasing distressed mortgages from Bahamian commercial banks, then either restructuring them or selling the underlying real estate collateral to new buyers.

Tribune Business last year reported that the company’s entrance into the Bahamas was especially being pushed by Scotiabank, and its Toronto head office, given that Ascendancy had successfully undertaken a similar task in dealing with its Mexican non-performing loans.

Sean Albert, Scotiabank (Bahamas) managing director, and its northern Caribbean head, declined to comment on the Ascendancy issue when contacted yesterday.

“There’s confidentiality around these things,” he said. “Even if I wanted to, I couldn’t answer you.”

Sir Franklyn was also tight-lipped, referring Tribune Business to Mr Saunders for comment.

“I am the chairman of the company [RoyalStar],” he said. “The financial statements say what they are. I don’t want to add anything to them.”

Tribune Business sources familiar with the Ascendancy situation suggested its arrangement with Scotiabank involved purchasing around $30 million worth of the latter’s mortgage portfolio at a price equivalent to $0.24-$0.25 on the $1, or 25 per cent of their value.

However, the same contacts said the initiative was being held up by the Government, which has yet to approve all the necessary permits.

This situation was confirmed by Mr Saunders yesterday, with this newspaper’s contacts - speaking on condition of anonymity - giving various reasons for the delay.

Some suggested the Government wanted to unveil its own Mortgage Relief Plan first, while others said the Christie administration was afraid of the potential stigma/backlash associated with a Mexican company’s involvement in acquiring distressed Bahamian loans and subsequently impacting Bahamian lives.

However, there is little argument that drastic action is required to tackle the Bahamas’ mortgage crisis.

Around $670 million worth of Bahamian mortgage loans are past due, weighing down both bank balance sheets and depressing their profits, via reduced interest income and higher loan loss provisions.

This, in turn, has resulted in a construction and real estate slowdown, and several thousand Bahamian families facing the loss of their homes, as banks continue to public 20-20 page brochures featuring distressed properties for which there are no buyers.

Mr Saunders told Tribune Business that Ascendancy Bahamas, and its operations, would become a key focus for RoyalStar Assurance once the company received all necessary approvals from the Government and the Central Bank.

“If Ascendancy takes off, as we believe it will, some of the management focus is going to be on helping the Bahamian people recover from distressed properties,” he told Tribune Business.

“Ascendancy is a new joint venture between us [RoyalStar] and related parties; numerous parties.”

RoyalStar’s 2015 financial statements show marked increase in related party investments between last year and 2014.

Apart from the $3.45 million injected into Ascendancy, some $496,000 and $536,673, respectively, were invested in promissory notes (bonds or IOUs) issued by Luxury Nirvana Ltd and Star General, the insurance agency and brokerage.

Luxury Nirvana is the company involved in a potential joint venture with BISX-listed AML Foods to develop a new shopping complex in the Yamacraw area, between Treasure Cove and St Andrew’s School.

And Star General is a significant investor, alongside Sir Franklyn’s Sunshine Holdings, in SunStar Ensure Ltd. The latter, in turn, owns a majority shareholding in RoyalState Holdings, the holding company that owns 100 per cent of RoyalStar Assurance.

The increase in related party transactions is likely to raise concerns among some observers over whether Sir Franklyn and other RoyalStar shareholders are using the insurer to finance, and capitalise, their other business ventures.

Mr Saunders, though, told Tribune Business that all related party investments had to be approved by RoyalStar’s conduct committee, a committee of its independent directors, before they went to the full Board for sign-off.

And he added: “We have to ensure all our solvency requirements are in place.”

Reiterating that RoyalStar believed related party deals would generate higher yields than alternative investments, Mr Saunders told Tribune Business: “We can’t afford for our monies, at this kind of time, to be sitting in the bank earning 1 per cent.”