Government to redeem at least 60 percent $167.7 mil. Bahamas Resolve promissory note

Government to redeem at least 60 percent $167.7 mil. Bahamas Resolve promissory note
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NASSAU, BAHAMAS – The government will be required to redeem at least 60 percent of the $167.7 million Bahamas Resolve promissory note on Bank of The Bahamas (BOB).

According to the 2019 fiscal strategy report tabled in Parliament yesterday, the government will likely have to redeem $100 million of the promissory note.

Under a promissory note executed in August 2017, a second tranche of non-performing assets were transferred from the Bank of The Bahamas to Bahamas Resolve Limited (Resolve).

Bahamas Resolve is the special purpose asset management company the Christie administration created in 2015 to clean up BISX-listed BOB’s balance sheet and go after loans the bank was unable to recover.

The report read: “The gross book value and corresponding value of the promissory note was $167.7 million, bearing interest at a rate of 3.5 percent semi-annually and with the principal becoming due on August 31, 2022.

“The first transfer, which took place during October 2014, was for $100 million, and the liability was eventually settled by the government in August 2017.

Resolve envisages being in a position to make its semi-annual payments on the $167.7 million note, which aggregates $5.878 annually and, to date, has been budgeted for and made by the Government.”

The report continued: “While Resolve is also making progress with the sale of properties, the degree of toxicity in the asset pool is likely to limit recovery of the gross book value of the loans which is significantly higher than the appraised value of the underlying security.

“Based on early estimates and, barring no change in status of several large exposures, it is likely that the Government will be required to redeem at least 60 percent of the $167.7 million note.

“It should also be noted that the Government is examining the possibility of acquiring suitable commercial properties out of Resolve’s asset pool for administrative offices.”

It added: “From the perspective of governance, the Government is working with Resolve to establish greater transparency in its operations, through the requirements for regular financial reporting and release of information on asset sales to the public.

The first audited financial statements, covering activities through 2018, should be released prior to end-2019.”