By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Some $37m in Bahamas Development Bank (BDB) bonds held by the National Insurance Board (NIB) were converted into a long-term 20-year loan as the lender’s solvency deficiency rose to $13.629m at year-end 2020.

The Government-owned financial institution’s financial statements for that year, tabled in the House of Assembly yesterday, reveal that converting the bonds to a loan with a 3.94 percent interest coupon saved the BDB from having to redeem $10m worth of bonds that were due to mature in 2020.

The $37m in bonds, divided into multiple tranches, carried interest coupons of either 4.25 percent or 3.25 percent, so the investment rate of return impact for NIB as a result of the loan conversion is unlikely to be hugely negative. However, the episode again highlights how the Government always seeks to adjust NIB’s investments when other financially troubled public sector entities need rescuing.

NIB also appears to have financed, via an outstanding $1.168m loan, the purchase of the BDB’s new head office on Robinson Road. The loan facility is set to be fully repaid by September 2029 and, in the meantime, the Government via Bahamian taxpayers paid all the $1.759m in principal and interest due on the bank’s bonds in 2020.

Elsewhere, the BDB’s auditors, BDO Bahamas, while not qualifying the financial statements or raising the “going concern” question, emphasised that the lender continues to rely on taxpayer subsidies for its existence. “The bank’s total liabilities exceeded total assets by $13.629m, and it has an accumulated deficit of $68.684m as at December 31, 2020,” BDO Bahamas said.

“However, the directors are satisfied that the bank is currently a going concern and that the preparation of these accounts on that basis is appropriate since the bank has been receiving financing from the Government of the Bahamas. The bank will continue to rely on the Government’s support in the foreseeable future.

“The bank has incurred significant operating losses in recent years and such losses are projected for the future. The bank is dependent on funding from the Government and it is anticipated that such funding, via the Government’s subsidy, will continue to be made available at a level sufficient to allow the bank to maintain its operations.”

The BDB’s 2020 financial statements reveal that both its solvency deficiency and accumulated deficit rose by almost $1.2m year-over-year, the size of its annual loss, although this represented a near 76 percent reduction on the $4.95m worth of ‘red ink’ incurred in 2019. However, 2020’s loss would have reached $2.957m without the provision of a $1.759m government subsidy, which was more than double the prior year’s $710,007.

And just $7.67m, or 50 percent of its net $15.213m loan portfolio, was categorised as performing at year-end 2020. Some $2.395m worth of credit was categorised as “COVID affected” loans. Total assets stood at $33.318m at year-end 2020, while total liabilities were at $46.947m.