The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government took up just one-third of Bank of the Bahamas’ controversial $30 million bond issue, which is now at the centre of the latter’s regulatory dispute with the Central Bank.

The troubled BISX-listed institution’s results for the nine months to end-March 31, 2017, which were released yesterday, revealed that the former Christie administration took up only one of the three $10 million contingent convertible bond issues.

“The bank offered a private placement of $30 million at 3.125 per cent fixed rate Perpetual Contingent Convertible Bonds to accredited investors only,” BOB’s financial statement notes said.

“This private placement was offered in three tranches of $10 million each. The first tranche has been subscribed by and issued to the Government as at December 31, 2016. This private placement offering has ended and closed on February 28, 2017.”

Capital markets analysts believe the bonds, with their extremely low interest rate yields, were structured so that the sole purchaser would be the Government, which is BOB’s 79 per cent majority shareholder.

Many viewed it as another taxpayer-funded bail-out of the stricken commercial bank, and it is unclear why the former Christie administration failed to pick up the final two issues, worth a combined $20 million in capital to BOB.

Mike Lightbourn, Coldwell Banker Lightbourn Realty’s president, and a BOB minority shareholder, yesterday suggested to Tribune Business that the Christie administration did not subscribe for the final two-thirds because the Treasury did not have the necessary funds.

“I guess they didn’t have it,” he said. However, BOB and its government-appoimted Board, and the former administration, may have been given pause for thought over the bonds by the Central Bank.

For they were one of the subjects identified in the February 8, 2017, supervisory mandates issued to BOB by its primary regulator. The third of four Central Bank requirements mandated that BOB “convert the first $10 million tranche of contingent convertible bonds to common equity Tier 1 capital, and all future capital injections must be paid in cash and constitute common equity Tier 1 capital”.

That demand is one of two BOB is seeking to resist through its Supreme Court action against the Central Bank, with many suspecting that the move was initiated because the bank - and the Christie administration - lacked the additional capital required to meet the regulator’s requirements.

Mr Lightbourn, meanwhile, called for BOB to hold an annual general meeting (AGM) of shareholders were the 21 per cent minority were allowed to fully raise all their concerns.

“I’d love for there to be one [an AGM], and I’m sure now there will be,” he told Tribune Business. “If there’s a new chairman, that’s positive.”

BOB has yet to hold an AGM, or even issue an annual report, for its 2016 financial year, which closed more than 10 months ago on June 30, 2016. Nothing has been heard from either the Securities Commission or BISX on the bank’s failure to provide timely disclosure to its investors.

Mr Lightbourn criticised BOB’s current chairman, Richard Demeritte, for quickly closing down negative questions at the bank’s last AGM.

He added: “I hope that when we have an AGM that Richard Demeritte is not there, and whoever is chairman will arrange to have questions answered with no restrictions.”

On the continued delay over an AGM and annual report, Mr Lightbourn said the scale of BOB’s woes, with the bank possibly “collapsing at a moment’s notice on a day-to-day basis”, meant it was impossible “to get their ducks in a row”.

BOB’s acting managing director, Renee Davis, sought to provide shareholders with an optimistic outlook in her latest report, arguing that the bank was making “positive strides”.

“Sustainable growth, effective management of our non-performing loans and improving operational efficiency remain the primary focus for the bank,” she said.

“As we prudently, systematically and urgently improve in these areas, the bank will return to profitability. Management is optimistic that the bank is on the path to recovery.”

She added: “As we report on our third quarter results we continue to focus on our initiatives around collections, sales and services, corporate governance, cost optimisation and customer care.

“Through these initiatives, we at BOB are committed to returning the bank to profitability, ensuring that each customer experience is exceptional, and that the solutions we provide are cutting edge.”

Mrs Davis said BOB’s total operating income rose by $0.8 million, or 10.2 per cent, for the quarter to end-March 2017, although this was not enough to reverse a 1.48 per cent or $400,000 decline for the first nine months.

“The bank continued to manage our shareholders’ resources judiciously, as we successfully reduced operating expenses by $0.3 million or 3.67 per cent for the quarter, and $0.9 million or 3.58 per cent year-to-date,” she added.

“Through various sales and services programmes, the bank has been focused on growing its revenue base, and as a result we have seen overall increases in net fees and commission income of more than $1 million year-over-year.”