The Tribune

• Ex-Cabinet minister blames Resolve for BPL cut-off

• But receiver duty to maximise recovery for taxpayer

• Fears re-opening will only worsen financial bleeding

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An ex-Cabinet minister’s ambitions to re-open his family’s business are likely to be blocked by the Supreme Court-appointed receivers for the Bank of The Bahamas’ (BOB) bail-out vehicle.

Leslie Miller, who was a key campaigner in the Progressive Liberal Party’s (PLP) re-election bid, told Tribune Business he was hoping to open Mario’s Bowling and Family Entertainment Palace this coming Friday once Bahamas Power & Light (BPL) restored electricity supply to the property.

Blaming Bahamas Resolve’s receivers for failing to pay the light bill, he added that negotiations were ongoing between himself and the receivers to secure restoration of supply. But Mr Miller’s hopes of re-opening Mario’s are likely to be dashed given their determination, and that of Bahamas Resolve, to maximise the recovery value for taxpayers who remain on the hook over Bank of The Bahamas’ two bail-outs.

James Gomez, Bahamas Resolve’s chairman, explained to this newspaper that permitting Mario’s to re-open will simply create extra operating expenses that would only add to ongoing losses being incurred at the Summerwinds Plaza where the business is located.

These losses are eating into the potential sum that could be recovered from ultimately selling the plaza and Mario’s to a new buyer, thereby reducing the taxpayer’s exposure to potentially having to find $167.7m to inject into Bank of The Bahamas’ balance sheet when the Government’s promissory note becomes due in August 2022.

The Tonique Williams Highway plaza, together with Mario’s, are both owned by Mr Miller and his family. Loans they obtained from Bank of The Bahamas, and which were secured upon its real estate assets, were transferred to Bahamas Resolve after they fell into delinquency status despite non-repayment.

But, despite having to obtain the approval of the receivers, Bahamas Resolve and the Supreme Court to re-open, Mr Miller last week told Tribune Business he was doing all he could to make this a reality.

“We’re still closed. The problem is the receivers have got all the money but never paid the bill with BPL and, when we tried to open BPL wouldn’t turn it on because they didn’t pay the bill. We should have everything cleaned up and move forward. We’re hoping to. We’re hoping to,” he said.

“They collect the money, the funds,” he added of the receivers. “Everything is put into their account, and they didn’t pay the bill. We’ll get it sorted out, not a problem. By next [this] week Friday we expect to be open. We’re talking to them right now. A new Board [for Resolve] will be in place shortly.”

Tribune Business understands that the receivers asked BPL to cut-off the electricity supply to Mario’s in a bid to stem the financial bleeding, as the Summerwinds Plaza was generating insufficient income from rent and other sources to cover operating expenses.

Mr Gomez did not confirm this, but explained that Mario’s and Summerwinds Plaza were two of the three companies overseen by Supreme Court-appointed receivers, Kirby Ferguson and Charles Barnett.

“What happens in a receivership is that the owner of the subject property cannot go and negotiate without the approval of receivers,” he said. “We are supposed to manage it, and manage the expenditure, as a result of the receivership, and ensure the debt is paid. 

“It cannot be paid because the entities are not generating sufficient cash flow to satisfy their indebtedness. As a matter of fact, the receivers have determined that for the moment they cannot satisfy their operating expenses.”

Those operating costs they are unable to meet include insurance coverage for Summerwinds Plaza’s real estate assets, and Mr Gomez said Bahamas Resolve and the receivers plan to submit a report to the Supreme Court and ask for “directions” on what they should do to stem the ongoing losses.

“We cannot hold it in abeyance without a report to the court,” he told Tribune Business. “It has to come to an end, and the indebtedness to Resolve must be satisfied.” Mr Gomez also confirmed that Bahamas Resolve was closely watching the outcome of Mr Miller’s legal dispute with the Government over the latter’s alleged breach of five multi-million dollar leases to rent space in the Summerwinds Plaza.

Justice Cheryl Grant-Thompson earlier this year awarded Mr Miller and his companies $9.846m damages for the Government’s lease breaches, but the appeal by the Attorney General’s Office and the Treasurer is set to be heard today by the Court of Appeal.

Mr Gomez suggested to this newspaper that any damages won by the former Cabinet minister would have to “come to Bahamas Resolve first”, and said: “When that case ends, a determination will have to be made. That’s why we decided to go to court, have it in receivership and we need to satisfy the debt. We’ll ask for approval for the sale of the property.

“We’re protecting the asset. The receivers are protecting the asset, and Resolve’s interest in this case, and the receivers don’t want to run-up any additional costs as a result of operations and impact the payout with respect to the amount owing to Resolve.”

Mr Gomez said Summerwinds Plaza and Mario’s net worth were closer to the full value of the original loan than many other borrowers/assets transferred to Bahamas Resolve from Bank of The Bahamas. “If you would recall, for a lot of those loans the security is far less than the value of the loan on the books. The security is really inflated,” he added.

“In this particular case, this has significant assets, about 50-70 percent of the loan amount. A lot of them are significantly below that.” Mr Gomez confirmed he remains Bahamas Resolve’s chairman, explaining that it operates differently from other government corporation and agency Boards.

Unlike the latter, Bahamas Resolve is a company formed under the Companies Act, and as a result Mr Gomez and his fellow directors must stay in place until there is a transition to their replacements because it cannot operate without a Board.

Bahamas Resolve was formed in 2014 as the so-called ‘bad bank’ to facilitate Bank of The Bahamas’ multi-million dollar taxpayer bail-out, which occurred in two stages - $100m in 2014, and another $167.7m in 2017. ‘Toxic’ commercial loans were removed from Bank of The Bahamas’ balance sheet and transferred to Bahamas Resolve.

In return, promissory notes or government bonds were injected into the troubled BISX-listed bank to fill the gaping hole in its balance sheet. While the first $100m note has already been redeemed, the second one - worth $167.7m - is due for redemption by the Government next summer, with the resulting cash payout going to Bank of The Bahamas.

The Government’s last Fiscal Strategy Report, tabled in the House of Assembly late last year, acknowledged the potential further strain that could be imposed on the Public Treasury when the $167.7m promissory note becomes due for payment in August 2022.

Suggesting that Bahamas Resolve could recover up to $67m of the promissory note sum, the Fiscal Strategy Report said: “The outstanding second promissory note of Bahamas Resolve to the Bank of The Bahamas becomes due in August 2022, and represents a fiscal cost to the Government which has been incorporated in the forecasts.

“Although Resolve has been able to make this semi-annual payment on the promissory note, which is $5.878m quarterly, it estimates being able to meet at least 40 percent of the $167.7m liability through loan recoveries. Therefore, the Government has provisioned in the estimates for 2022-2023 an additional outlay of $100m.”