The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A "bad mortgage" acquirer is aiming to further relieve distressed borrowers and their lenders by expanding into unsecured loan purchases, it was revealed yesterday.

Sir Franklyn Wilson, whose group is one of the investors behind Gateway Financial, told Tribune Business that the joint venture involving an arm of the World Bank was "exceeding every expectation in terms of how much good it is doing" for all sides of The Bahamas' delinquent loan crisis.

While unable to place a value on the distressed loans acquired from Bahamian commercial banks, Sir Franklyn said Gateway's "very material" impact had eradicated the doubts previously harboured by the Christie Cabinet's members who had initially been reluctant to approve the venture.

He shared with Tribune Business an e-mail received on Saturday from a mother of seven, expressing gratitude that Gateway had managed "not to throw us out on the streets" and instead given them "a fresh start", as one example of how the debt restructurer's work is benefiting Bahamians.

"Gateway Financial quietly, quietly is doing a yeoman's work in terms of keeping people in their homes," the Sunshine Holdings chairman said. "You would note there's not as much adverse commentary about people being put out of their homes.

"A major reason for that is Gateway Financial. A note I got from a customer the other day speaks in terms of how she couldn't believe what happened. This woman was literally out of her home, and we worked it out where we were able to give her a deposit and found her another home she and her family could qualify for."

That note, shared with Tribune Business, said: "It was very stressful to me not knowing where my family would end up due to the sale of the house. I thank God for allowing your company to... show the compassion that it did, along with the realtor that was allocated to make this hard transition easier. She was very humble in doing what she can and very patient.....

"My family just wanted to say: 'Thank you Gateway'. In a difficult situation, you made a way out of no way for a family of seven. Thank you for giving us a fresh start, hope and a chance. Thank you for not looking down at our previous condition because of our issues. Most of all, we thank you for not throwing us on the streets with our kids."

Sir Franklyn added that the message had also been shared with members of the former Christie administration, who he said "were ambivalent as to whether to approve Gateway". That process took some time, and he added that they expressed relief that Gateway was not only operating as intended but moving to expand.

"The company is very active," Sir Franklyn explained, "not only in the distressed mortgage market but extending this to where it is financing the acquisition of unsecured loan portfolios.

"The governor [of the Central Bank] spoke about the level of delinquency, and the banks are becoming conscious not only of distressed mortgages but unsecured loans. Gateway is now securing unsecured loans. Its impact has exceeded every expectation we had in terms of how much good it is doing for this society."

By purchasing delinquent loans below value, or at "cents on the dollar", Gateway Financial is able to ensure that Bahamian commercial banks recover something of their worth while also cleaning up their balance sheets. The removal of this distressed credit also reduces loss provisioning and other costs, freeing the banks to resume new lending activities.

And, by acquiring delinquent mortgages below book value, Gateway is often able to restructure and rewrite the loans to the point where distressed borrowers can actually afford the repayments, thus keeping Bahamians in their homes and current with their new loans.

Its move into unsecured loans now also takes it into personal credit, meaning it will be dealing with borrowings to purchase cars, furniture and other high-end, expensive goods.

Besides Sunshine Finance and RoyalStar Assurance, the two Sunshine Holdings group affiliates, Gateway Financial's other investors/shareholders include the World Bank arm, the International Finance Corporation (IFC), and the Mexican firm, Ascendancy.

Sir Franklyn argued that the World Bank's involvement has "no precedence" in this country, and he added that the International Monetary Fund (IMF) on a recent visit to The Bahamas "made it a point to visit Gateway to monitor what's happening because its impact is that material".

The planned expansion of Gateway Financial's activities comes just as John Rolle, the Central Bank's governor, said he wants to further cut the banking industry's "terrifying" 8.7 percent loan delinquency rate by more than half despite it having fallen to its lowest level since November 2008.

While describing the consistent decline in non-performing bank loans as "very encouraging", John Rolle said even a four percent delinquency ratio was "not complimentary" by international standards.

Pointing out that one consequence of high loan delinquency rates is higher interest rates and fees for Bahamian borrowers who are in good standing, he added that the proportion of outstanding bank credit in default locally is still more than double the ratio that would strike fear into developed country banks and their regulators.

Mr Rolle said a "comfort zone" for non-performing credit, which represents loans that are 90 days or more past due, would be "a rate that is less than half of what we are experiencing" now. Based on the governor's comments, this implies a rate of less than four percent - a ratio not seen by the Bahamian commercial banking industry since before the 2008-2009 recession.

The total value of non-performing Bahamian commercial bank loans peaked at just under $1bn in June 2014, but the Central Bank's latest economic developments report reveals that figure has been cut by around 50 percent to $491.8m or 8.7 percent of outstanding credit.

Total private sector arrears, which also includes bank loans between 30-90 days past due, fell by $28m or 3.9 percent in June alone to close the month at 12.2 percent of outstanding credit - a figure described by the Central Bank as "the lowest level recorded since November 2008" - almost 11 years ago.