Parliamentarians yesterday debated and passed a resolution for the conversion of $37 million in Bahamas Development Bank (BDB) bonds to a loan with the National Insurance Board (NIB).
The BDB is seeking to have its sinking fund released to meet the significant demand for credit at this time.
Minister of Tourism Dionisio D’Aguilar, who led off debate on behalf of Deputy Prime Minister and Minister of Finance Peter Turnquest, who is in self-quarantine, said the BDB has not been sufficiently recapitalized over the years and to address this critical need the government is obliged to provide a guarantee in support of the NIB bond to loan conversion.
“We can agree that as a country we are facing significant economic challenges resulting from the COVID-19 pandemic. The Bahamas Development Bank has a critical role to play in addressing the countercyclical impact that we expect in the months ahead,” he said.
Progressive Liberal Party Deputy Leader Chester Cooper, who is also the shadow minister of finance, however questioned the transparency of the bond conversion.
“I’ll say off the top that I have no objection to this bill, nor the objective as described. It’s nothing too complex, it appears to be a restructuring of the balance sheet of the bank by refinancing the bond with a government guarantee debt. I get the underlying financial gyration. I will say though, that I am offended that the government would bring such a resolution without the bank’s financials. If you don’t have up-to-date audited financial statements at a minimum bring the management accounts,” he said.
“In the private sector, it is highly unusual and frowned upon to be asked to restructure a balance sheet without actually seeing the balance sheet. So, you come to Parliament, your board of directors who represent your shareholders, the Bahamian people and ask us to act blindly.
“No discussion or analysis on the entity. No forecast or strategic plans. No long-term business plans. No idea of the mechanism for funding for the bank to do what it is supposed to actually do. This is wholly inappropriate and disrespectful I might add. We have to operate with more transparency in these matters.”
D’Aguilar noted that the BDB has been re-engineered over the past 23 months and has made steps toward its revitalization, including the creation of a five-year strategic plan which calls for the bank to achieve financial stability, increase reach through new products and distribution channels, enhance governance and oversight, streamline internal processes, develop internal capacity and maximize development impact with alignment to sustainable development goals.
“Over the years the proceeds from the bond issue were utilized for bond lending to Bahamians. As a result of various factors including the adverse impact on the global and local economies, BDB experienced similar challenges to that of commercial banks as regards to the performance of its loan portfolio,” he said.
“It is important to note BDB is not just a bank but a development bank and as is typically the case, the risk appetite differs from that of a commercial bank because its purpose is fundamentally different. BDB does not operate with a profit as a primary focus. The development bank exists to invest in areas the country needs but the private sector will not go. It has the great task of forging ahead an nurturing not just businesses, but industries until they can stand on their own and access capital from traditional sources of funding.”
The loan conversion is being made available at a rate of 3.94 percent over 20 years.