The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent Bank of the Bahamas investor yesterday said "a red line must be drawn" over its future at the upcoming annual general meeting (AGM), after it missed a second dividend payment to preference shareholders.

Darron Cash, the former FNM chairman and senator, he would be "aggressively pursuing" shareholder resolutions at the August 2 meeting in a bid to obtain specific details on any turnaround plan for the troubled BISX-listed institution.

Warning that minority investor patience had been stretched to breaking point, Mr Cash warned that the Minnis administration will "be fooling itself" if it believes a new Board is sufficient to solve all Bank of the Bahamas' woes.

Calling for "leadership changes" at the management level, he also cautioned the Government against giving Bank of the Bahamas "carte blanche, unqualified support" until signs of a sustained turnaround emerged.

Mr Cash was speaking after Bank of the Bahamas confirmed on Friday that it will miss a second semi-annual dividend payment to preference shareholders due to its weak financial position and solvency challenges.

Capital markets sources familiar with the situation said Bank of the Bahamas had informed preference shareholders that it was "not allowed" to make the dividend payments, although it did not explain why.

"One has to kind of join a few dots, but I think that the Central Bank wouldn't let them pay the dividend," one source said, speaking on condition of anonymity. "The explanation would be that Bank of the Bahamas has not fully met the capital requirements the Central Bank has."

They added that Bank of the Bahamas executives had informed them they were "working on some plans" that could allow payment of a preference share dividend if successful, but no details were provided.

This is likely to involve some kind of capital raising, and the August 2 AGM's timing suggests that the BISX-listed institution and the Government, as 82.58 per cent majority shareholder, may be hoping to unveil their strategy then.

Tribune Business revealed earlier this year that holders of Bank of the Bahamas' class A, B, D and E preference shares had not received their customary year-end dividend for 2016, and now the BISX-listed institution has confirmed the mid-year payment will not be forthcoming.

The non-payment comes after Bank of the Bahamas became embroiled in a legal battle with the Central Bank over the latter's regulatory impositions, and continuing losses that have added to the $120 million-plus in 'red ink' that has accumulated since its October 2014 'bail out'.

The bank's latest financials showed that its total comprehensive loss for the nine months to end-March 2017 jumped by 69 per cent year-over-year, growing from $6.707 million to $10.793 million.

With the increasingly grim situation at Bank of the Bahamas' showing little sign of improvement, Mr Cash told Tribune Business: "There really ought to be a red line drawn at this AGM. At some point it should not get worse. At some point it has to begin to reach a turnaround posture."

He accused the former Christie administration of doing "very little to almost nothing" to address the problems plaguing Bank of the Bahamas, headed by a loan portfolio where a staggering 46.07 per cent, or $234.886 million of the $510 million book, was non-performing at end-June 2016.

Describing the bank as "a financial institution on the brink of collapse", Mr Cash added: "This is an organisation where survival at this juncture is almost 100 per cent contingent on the support of the Government of the Bahamas.

"Without the support of the Government of the Bahamas, the organisation would collapse.... At this juncture, we do not know the full complement of the Board at Bank of the Bahamas. For an institution that is highly troubled, that is not acceptable.

"The Board ought to have been announced already, and some information put out in specific terms on what the Government intends to do to turn the organisation around, and what the new Board intends to do to turn the bank around. The failure to name a full Board does not inspire."

The Minnis administration has named financial services professionals, Wayne Aranha and Anthony Allen, as the bank's chairman and deputy chairman, respectively. Attorneys Kirk Antoni and Ruth Bowe-Darville have also been named as Bank of the Bahamas directors.

Mr Cash, though, said minority shareholder confidence was low because the previous Board had "lacked financial acumen" and failed to address investors' numerous concerns.

Calling for change to go deeper beyond the Board level, he added: "It is critical going into the AGM that minority shareholders be given some indication as to whether there will be meaningful changes at the executive level.

"The fact that, at this stage, the bank is unable to meet its commitments to preference shareholders gives the impression none of the turnaround initiatives enunciated by the executive leadership at previous AGMs have worked."

Mr Cash continued: "Going into a new administration with a new Board; that is basically a maximum of half the change needed to turn the organisation around or inspire confidence that the people people governing it have the capacity to do it.

"I cannot be just a new Board, but executive changes at the bank. The Government will be fooling itself if it thinks just changing the Board is enough.'

The former FNM chairman also warned Deputy Prime Minister, K P Turnquest, "to be extremely careful" in his vocal public statements of support for Bank of the Bahamas and its current management.

"Within four months he will own everything the previous government has done," Mr Cash said of the Deputy Prime Minister. "The existing administration within the bank have not done enough to demonstrate they are still deserving of this government's unquestioning loyalty and support.

"I would be very cautious in giving carte blanche support until such time as these guys produce, and shareholders can see what is different with the new administration."

Mr Cash also urged the Government to use the upcoming AGM to clarify whether it supported, and will see through, plans announced under the previous administration and Board to appoint independent directors to Bank of the Bahamas' Board to represent minority shareholder interests.

To-date, the Board has been 100 per cent dominated by directors appointed by the Government, but Mr Turnquest previously announced his support for the initiative.

Still, Mr Cash told Tribune Business: "I will be aggressively pursuing to bring some shareholder resolutions before the AGM.

"There are a lot of unanswered questions and issues that ought to be addressed at the AGM, and perhaps this administration will be more forthcoming in presenting information and details as to how to turn this bank around.

"There are a number of issues about the governance of the bank under the previous regime that ought to have a more open discussion in an AGM in terms of the policy decisions made by the former Board that were of questionable nature," he added.

"We've given the previous Board and management latitude to demonstrate their ability to follow through and turn the bank around. Certainly in the minds of shareholders the history has been that we cannot rely on the Board and management to provide meaningful information.

"The previous statements about turnaround, profitability have not borne fruit, so specifics about what is going to happen going forward should be discussed at the AGM so people walk away with enough information to decide whether to burn their share certificates."