|Authored by:||Betty Vedrine|
|Source:||Bahamas Information Services|
|Date:||November 3, 2014|
Prime Minister, the Rt. Hon. Perry G. Christie announces the establishment of Resolve, a new Bahamian company, which will take control of commercial loans in default at the Bank of The Bahamas. The announcement was made during a press conference held at the Office of The Prime Minister on Friday, October 31. Also pictured, L-R: Mr. Paul McWeeney, Managing Director, Bank of The Bahamas; the Hon. Michael Halkitis, Minister of State for Finance; and Mrs. Wendy Craigg, Governor, Central Bank. (BIS Photo/Peter L. Ramsay).
NASSAU, The Bahamas – A new Bahamian company has been established to take over $100 million in troubled commercial loans from Bank of The Bahamas Limited. The new company, named ‘Resolve’, will focus on recouping the outstanding loan balances owed to the government. The announcement was made during a press conference held at the Office of The Prime Minister on Friday, October 31. Prime Minister, the Rt. Hon. Perry G. Christie, said that the government made this move in an attempt to ‘return the Bank to its former glory’ as a profitable entity.
“Resolve has taken over B$100M in troubled commercial loans from Bank of The Bahamas, thereby removing this risk from BOB’s books. In so doing, the Bank’s revenue prospects will be immediately and significantly improved. At the same time, shareholder value and the Bank’s overall financial condition will be enhanced as well. It will also allow Bank of The Bahamas to return to profitability in the near future and will restore full compliance with Central Bank and international regulatory standards for capital adequacy,” said Prime Minister Christie.
Mr. Christie emphasized that no public funds or National Insurance funds have been disbursed in connection with the assignment of these loans from BOB to Resolve. Instead, he said that liability for these debts has been transferred to Resolve along with the benefit of the loans and the underlying security. He explained that as the new owner of the transferred loans, Resolve would be implementing special mechanisms to assist in the collection of the overdue loans.
Secondly, this move, under which $100 million in commercial loan debt has been transferred from BOB to Resolve, was developed in close consultation with BOB’s legal advisors in this matter, Higgs & Johnson, and BOB’s external auditors, Ernst & Young, both of whom have provided affirmative opinions on the transaction.
And thirdly, Mr. Christie said that this type of transaction is ‘not fundamentally dissimilar to state-led re-structuring’ exercises that have been undertaken in more developed economies of the world, including the U.S in the wake of the 2008 recession.
Mr. Christie said that the Government has plans to take other measures as well.
“In addition to what I have just outlined, I wish to make it known that the Bahamas Government, consistently with its 65% stake in BOB, will be pursuing new initiatives designed to steer more public sector business and public employee credit demand towards the Bank of The Bahamas,” he said. “ In doing so, however, the Government will, of course, be mindful of its obligation to maintain a fair and competitive commercial environment for all banks in The Bahamas. I have therefore instructed the Ministry of Finance to determine the best course of action for achieving these objectives on a correctly balanced basis.”
There are also plans for BOB to undertake re-structuring action of its own to re-align and re-balance the bank’s business model towards more retail banking, consumer lending and e-banking products. To this end, Mr. Christie said that BOB’s Board of Directors has been given several directives.
“BOB’s Board of Directors has also been directed to assess its management and cost structure, and to submit recommendations to the Government, as the majority shareholder, for management and administrative re-organization, before the end of 2014,” said Mr. Christie.
BOB is 100% Bahamian-owned: 65% by the Government of The Bahamas, with the remaining 35% being widely held by some 3,500 Bahamian shareholders. The bank has total assets of $771 million dollars, in comparison to only $93 million when the Government acquired ownership of the bank from the Bank of Montreal 25 years ago in 1988. The Bank has approximately 40,000 depositors today with deposits totaling $679 million dollars. It has total loan assets of approximately $650 million dollars and operates through 14 branches in The Bahamas. Currently, the bank employs over 350 Bahamians.
Bahamas Resolve Ltd (“Resolve”) is wholly owned and wholly controlled by the Government of The Bahamas.