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WEDNESDAY, DECEMBER 21, 2022
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‘Lots of muscle’ required for $142m toxic BOB pile By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bank of The Bahamas bail-out vehicle must now employ “lots of muscle” to recover its remaining “toxic” loan collateral valued at $142m, its chairman revealed yesterday. James Gomez, Bahamas Resolve’s chairman, told Tribune Business it has largely recovered the “low hanging fruit” among delinquent Bank of The Bahamas commercial loans that it received via two transfers in 2014 and 2018. Disclosing that some $40m has been recovered to-date, on assets appraised at a collective $63m, he said Bahamas Resolve is now focusing on the “more toxic” credit in its portfolio where success will be “key” to minimising the potential
• Bail-out vehicle recovers $40m ‘low hanging fruit’ • Resolve focusing on ‘key’ five loans worth $100m • Chair says bad loan ‘outstanding debt’ is $204m financial “burden” for both the Government and Bahamian taxpayers. Mr Gomez, acknowledging that the bail-out vehicle’s work will take some years to finish, told this newspaper that the work-out of five loans worth a collective $100m will be key to remaining recoveries. While he declined to identify the borrowers involved, one of the five is almost certainly the Summerwinds Plaza on Tonique Williams Highway that was pledged as
collateral by former PLP cabinet minister, Leslie Miller, and upon which more than $30m is alleged to be owed. That loan is currently the subject of a court battle, but Mr Gomez voiced optimism that Bahamas Resolve’s recovery efforts are proving effective even though the outstanding debt still owed is worth $204m - a sum he said “contemplates write-offs”. Should the full $142m value assigned to remaining loan security be
realised, this will only be equivalent to 69.6 percent of that debt, thus leaving a potential $62m shortfall. Some 391 commercial and residential properties are among the assets left on Bahamas Resolve’s books, the chairman confirmed, with almost one-third of these accounted for by a 131lot residential subdivision. Mr Gomez, though, said progress had been made in bringing the company’s financials up-to-date with audited statements covering all years through 2020 now completed. “Things are moving along as anticipated,” Mr Gomez told Tribune Business. “The real issue is that during the first couple of years it’s good to deal with the low-hanging fruit. Now we are getting into the real toxic stuff and that, of course, provides the challenge. These are
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Insurers: Don’t sleep on EU blacklisting ‘breathing room’ • Threat to 40% of reinsurance capacity remains • Despite Germany eliminating withholding tax • Danger to ‘viability’ of Bahamas underwriters By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamas must not fall asleep after it gained “two years’ breathing room” to escape the European Union’s (EU) tax blacklist and preserve up to 40 percent of its hurricane reinsurance capacity, insurers are warning. While the immediate threat has been eliminated, Bahamian property and casualty underwriters are urging the Government to promptly enact the necessary reforms to secure this nation’s exit from the EU listing and thus preserve their ability to continue writing present levels of coverage. Should the 27-nation bloc’s ‘blacklisting’ remain
in place, it could still bar German reinsurers from underwriting multi-billion dollar risks in The Bahamas as of end-2024 despite that country’s parliament eliminating the more immediate threat of a 15 percent withholding tax being imposed on all claims payouts to this nation. Anton Saunders, RoyalStar Assurance’s managing director, told Tribune Business that the German legal amendments passed last Friday should give The Bahamas sufficient time to satisfy the EU given that this has removed the possibility of a 15.82 percent withholding tax rate being levied on claims payouts from January 1, 2023.
SEE PAGE B4 IDB brands price controls CCA: We’ll ‘be laughed at by ‘poorly targeted subsidy’ world’ if Baha Mar not open ‘Unenviable balancing act’ confronting The Bahamas
By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
THE Government’s price controls are a poorlytargeted mechanism to counter soaring 16 percent food inflation as they benefit the rich as much as low income and vulnerable families, a multilateral lender is arguing. The Inter-American Development Bank (IDBO), in its latest quarterly Caribbean economic bulletin, indicated that social assistance to offset the cost of living crisis could be better focused on poor families through the use of conditional cash transfer (CCT) initiatives that build on existing initiatives such as food stamps. It also backed the Retail Grocers Association (RGA) in warning that price controls will disproportionately impact small and medium-sized food stores that lack the breadth of product range and economies of scale - in comparison to larger competitors - to absorb selling
more items at a loss, or below cost. “A price control, at least in terms of behaviour if adequately enforced, is a de facto combined turnover tax and income redistribution policy (a cash transfer from business to consumers),” the IDB wrote. “Revenues for specific products that would have accrued to specific businesses, and possibly to the Government in the form of an increased VAT, would now be transferred to all Bahamians. “Additionally, despite the updates, the price controls do not differentiate using size or profitability. Therefore, this policy is likely to impact small and mediumsized enterprises negatively and disproportionately because they are more likely to have neither the volume of sales nor the economies of scale to absorb the per unit loss of revenue. In addition, they will have to use these same diminished margins to cover increasing electricity bills and labour costs.”
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By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
TOP executives at Baha Mar’s main contractor voiced fears they would “be laughed at by the world” if the mega resort’s target 2015 opening was missed while admitting to multiple “shortcomings and deficiencies” in its construction. E-mail exchanges between Ning Yuan, China Construction America’s (CCA) president, and Guocai Chen, its general manager, revealed that the Chinese state-owned contractor was - exactly two months
from Baha Mar’s agreed March 27, 2015, completion - privately praying for a miracle this target would be achieved. The never-before-seen correspondence, filed in the New York State Supreme Court at the weekend in the $2.25bn fraud and breach of contract battle between CCA and Baha Mar’s original developer, Sarkis Izmirlian, reveals CCA’s concern that all construction work had to be completed within 19 days if the project was to stand a chance of passing code inspections by the
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By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamas “faces an unenviable balancing act between food security and fiscal discipline”, the Inter-American Development Bank (IDB) warned yesterday, with global financial developments proving “particularly concerning”. The multilateral lender, in its latest Caribbean quarterly economic bulletin, said the combination of US interest rate hikes as well as forecasts of a global
recession were especially unfavourable for The Bahamas’ ability to access the international capital markets for foreign currency bonds and other debt. Pointing out that such financing has become more costly, with investors likely to shy away from emerging markets due to the higher returns available on US investments as well as recession fears, the IDB said: “With the likelihood of a global recession increasing, appetite for emerging
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