Bahamas Resolve Ltd. Chairman James Smith said it is likely that there will be a difference between the value Bank of The Bahamas places on the loans transferred to Resolve and the value Deloitte & Touche places on those same assets. Smith also reported that parties have already begun expressing interest in purchasing the assets on the Resolve books.
In order to return Bank of The Bahamas to Central Bank of The Bahamas mandated levels of liquidity last year, the Christie administration created a special purpose vehicle - Resolve - on October 31, 2014 and transferred non-performing commercial loans with a book value of $100 million to the new entity. In exchange, the government issued the bank $100 million in bonds backed by a "letter of comfort". The bonds allowed the bank to return to proper levels of liquidity.
Minister of State for Finance Michael Halkitis called it "a made in The Bahamas solution". Smith spoke with Guardian Business about the work of Resolve, and pointed out that Deloitte & Touche - the accounting firm hired by the government to collect on the loans - is at present doing an assessment of what it believes to be the value of the assets that were transferred, which Smith assured is likely to be different from the bank valuation.
Bank of The Bahamas' own records show the actual value of the bad loans at $45 million, which means the bank generated $55 million in shareholder equity through the transaction.
"The accounting guys are now looking at what has been transferred and they will probably even be visiting the sites and making an evaluation and in some cases they might even have to go out and get a real estate appraisal," Smith explained.
"Yes, I expect there will be differences. I have no idea how large the difference, but I also know that the final count would be once you have cleared up all of the assets and determined the actual as opposed to the projected or provisional losses."
Smith explained that Deloitte and Touche will prepare and present a set of financials on the company, which would show their valuation versus what is on the book.
Assets generating interest
Smith also reported - without citing specifics - that the collateral assets on Resolve's books are the subject of interest.
"People might know of the properties that are being transferred, and in their mind it might be something sought after, so they would approach the auditing company," Smith said. "In this town, nothing is really secret, so they would hear about it from one source or the other. So that has been happening."
Pressed for information about those assets, Smith revealed that he still had not yet been briefed as to what exactly was transferred to Resolve, or what were the underlaying assets. He told Guardian Business that administrative maneuvering was underway to properly seat the four new directors of the company, which he said could be completed as early as next week. Once that is done, the board will be able to meet and be briefed by Deloitte & Touche on the state of affairs.
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