The Tribune

• Minnis: Monies would have aided new facility

• Argues: 'You could not have got better rate'

• Darville: Gov't 'not satisfied' with SME split

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former prime minister is charging that the Government made "a grave mistake" by returning more than $86m in low-cost financing for Princess Margaret Hospital's (PMH) expansion to the original lender.

Dr Hubert Minnis told Tribune Business "you could not have gotten a better interest rate" on funding his administration had secured, and which was already in The Bahamas prior to the September 2021 general election, via a World Bank guarantee.

He argued that the Davis administration's error has been exposed because these monies would be especially useful as it seeks similar low-cost funding for its proposed $290m new hospital for New Providence, to be located at Perpall Tract, after being forced to abandon earlier plans to develop this facility via a private-public partnership (PPP) model because financing costs were too expensive.

However, Dr Michael Darville, minister of health and wellness, yesterday told this newspaper that the Davis administration was uncomfortable with the fact that a portion of the World Bank-guaranteed financing had been allocated to funding the start-up and expansion of micro, small and medium-sized enterprises (MSMEs).

Around $20m of the $115m financing, which was provided by Banco Santander and underwritten by the World Bank’s Multilateral Investment Guarantee Agency (MIGA), was allocated to that purpose. Dr Darville, though, explained that the Davis administration wanted the entire $115m facility to be dedicated to improving The Bahamas' healthcare infrastructure and sought to renegotiate the loan terms with Banco Santander.

However, Banco Santander had "no appetite" for such a renegotiation where the financing would go solely to healthcare improvements, and the Ministry of Finance advised that the best course was "to send the money back" which it did in April 2022. While talks continue with the same bank over the provision of financing for Grand Bahama's new hospital, Dr Darville confirmed the Government is now moving in a different direction with its plans for New Providence.

Dr Minnis, meanwhile, confirmed that a portion of the World Bank-guaranteed financing was allocated to Bahamian MSMEs via the Small Business Development Centre (SBDC) but remained resolute that it was "a mistake" for the Davis administration to return the healthcare portion given the need to secure the same low-cost financing for its New Providence hospital plans.

"Darville and those didn't proceed with it. I think it was a mistake," the former prime minister said. "That funding was to do a four-storey tower at the existing PMH site similar to the Critical Care Block. It was $115m from the World Bank (Banco Santander), and $20m was for the Small Business Development Centre so that the small businesses had access to money for start-ups and expansions.

"They [the Davis administration] were concerned that some of the money was utilised, and we had issued about $20m to the Small Business Development Centre. The rest, over $85m, was earmarked for expansion at the Public Hospitals Authority (PHA)." Dr Minnis said the proposed four-storey tower would have included an accident and emergency (A&E) unit on the ground floor, with additional beds on the third and fourth levels to address the hospital's capacity challenges.

Dr Darville said earlier this week that the Government was prepared to guarantee, or underwrite, the new Perpall Tract hospital's funding due to the project's importance to the Bahamian people's health welfare even though this could further increase the already $11bn-plus national debt.

However, the former prime minister asserted that his administration had secured the World Bank-guaranteed loan at an interest rate of just 1.879 percent. "I think it was a grave mistake," Dr Minnis told Tribune Business of his successor's decision to return the funds to Banco Santander.

Pointing out that "all utilities and infrastructure" were already available at the existing PMH site, he added that costs associated with those two areas will likely be much higher at Perpall Tract since it is an undeveloped site. "Putting it at the same site as the Critical Care Block was the proper way to do it," Dr Minnis added. "Had they followed that route, the funding was already here and the problem they are facing with bed shortages would not be an issue.

"I think it was a grave mistake, but that's the Government. You could not have gotten a better interest rate than 1.879 percent offered by this $115m World Bank loan. The professionals had expressed to us that all the amenities and infrastructure were on the existing site, and that it would be cheaper and more beneficial to the Bahamian people to expand the existing site, which is why they recommended the four-storey tower similar to the Critical Care Block."

Dr Minnis also voiced concern that healthcare staff, under the Davis administration's plans, will ultimately be split between two sites - the existing PMH and Perpall Tract. "One has to be very careful about splitting staff. That comes with challenges, and staffing is a big issue," he added.

Tribune Business records show the interest rate attached to the World Bank-guaranteed facility as being 3.23 percent, rather than 1.879 percent. The Ministry of Finance confirmed that the funding was returned in its monthly fiscal report for 2022, stating that the $46.2m surplus for the month this was “largely owing to the return of a $86.2m PHA (Public Hospitals Authority) capital subvention”.

Dr Darville, though, said the inability to renegotiate the loan terms to its liking meant the Davis administration was ultimately justified in returning the funding despite its relatively low cost under the World Bank guarantee. "When we came into office, there was funding obtained by the former administration to build that particular tower that was already at the Central Bank," he explained.

"We started to do an investigation of the funding because it had low interest rate capacity. The funding was not just for the four-storey tower; it was also tied up with small and medium-sized business loans and we could not get our hands around it. We went back to Banco Santander to make a determination as to how we could separate the two; we did not like the small and medium-sized business component.

"We were not satisfied," Dr Darville continued. "We tried to negotiate funding specifically for healthcare. The bank had no appetite. They said they cannot make any adjustments to the loan, and we were advised it may be in the best interest to send the money back and renegotiate.

"The Ministry of Finance was in the negotiation, and a final decision was made to send the money back. The reason why it had to go back was because the bank was not willing to renegotiate the terms of the loan and use the money specifically for healthcare infrastructure improvements.

"We couldn't renegotiate. The way the loan was structured it was not conducive to the way the Government was going, and it had an interest and appetite only for resources for healthcare. The way the loan was structured, it was very difficult for us to continue in that direction."

Dr Darville said the Davis administration was challenged to find all the information relating to the Banco Santander financing when it took office as the relevant information was scattered "in different areas". He added: "We had the Ministry of Finance determine where the loan was, if the money was actually at the Central Bank, what the interest rate was and to look at how it was structured.

"They felt we needed to renegotiate it. When we started negotiations with the bank, it was very difficult to change the direction of the loan so we were advised to send the money back." Confirming that talks continue with Banco Santander on Grand Bahama's hospital, the minister said of New Providence: "We have gone elsewhere, hopefully to get a similar interest rate. The rate we were getting under the PPP was not sufficiently low."