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'Asset Preservation' Key For Troubled Borrowers

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian corporate liquidators will likely take on more of a management/receiver type role, a leading accountant believes, as banks and other creditors increasingly try to ‘nurse’ troubled borrowers back to health.

Craig A. ‘Tony’ Gomez, the Baker Tilly Gomez accountant and partner, told Tribune Business he expected “no major liquidation to come to market in 2014”.

Instead, creditors were increasingly looking for ways to “preserve” troubled companies, given that with buyers few and far between, the prospect of recovering 100 per cent of what they were owed was slim to non-existent in a liquidation.

And, with few buyers able to acquire the huge number of distressed mortgage properties on their books, Mr Gomez said it was “incumbent” on banks and other commercial lenders to maintain those assets in the best condition possible.

“There isn’t a market for banks to sell assets to, particularly in the Bahamas, so it’s incumbent upon them to preserve the asset and get it ready for the buyer market. I see that as the way forward for the Bahamas,” Mr Gomez told Tribune Business.

The latest Central Bank of the Bahamas data, from November 2013, disclosed that some $1.343 billion worth of credit - more than $1 out of every $5 lent by Bahamian commercial banks - was in default.

Some $972 million worth of this sum was non-performing, meaning it was more than 90 days past due, and banks have stopped accruing interest in them. This figure is equivalent to 15.8 per cent of the total Bahamian commercial banking industry’s outstanding credit portfolio.

Illustrating the plight noted by Mr Gomez, the Central Bank said: “The growth in delinquencies was largely attributed to the mortgage component, which advanced by $18.7 million (2.7 per cent) to $713.5 million, as both the short-term and non-accrual segments expanded by $13.4 million (7 per cent) and $5.3 million (1 per cent), respectively.”

Few buyers are qualifying for credit that would allow them to purchase these distressed properties, creating a major supply overhang in the real estate market, as shown by the 30-page newspaper supplement regularly produced by FINCO.

As a result, many defaulting borrowers have been allowed by the lender to stay in their homes for between two-three years.

Mr Gomez, meanwhile, who is the court-appointed liquidator for CLICO (Bahamas) and Leadenhall Bank & Trust Company, suggested banks and lenders would have to adopt a similarly moderate approach when dealing with delinquent commercial borrowers.

“No major liquidation is coming to the market, but we know many companies are troubled and there’s a way to preserve them,” Mr Gomez told Tribune Business.

He was backed by his namesake, James Gomez, a Baker Tilly Gomez accountant, who agreed that liquidators would be taking on “more of a monitoring and receivership type role”, sometimes supporting banks in turning around troubled companies.

Both men were speaking during the visit to Nassau of Geoff Barnes, Baker Tilly International’s president and chief executive, who confirmed that banks were now “loathe to shoot companies”.

They were instead trying to work troubled clients out of their mess, often putting their own people in to help run them.

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