The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE 3,000 minority shareholders in Bank of the Bahamas will not accept any Government buy-out offer unless it makes them “whole”, a former FNM chairman said yesterday.

Darron Cash, one of the long-suffering 3,000, told Tribune Business that it was effectively “back to the drawing board” for the Government in terms of its approach to rescuing the BISX-listed institution and returning it to sustainable profitability.

Warning that there were no good, obvious policy options for the Government, Mr Cash said it was “the Bahamian people who stand to lose the most” as a result of repeated taxpayer-funded bailouts of Bank of the Bahamas.

He added that taxpayer monies were effectively being poured into a ‘black hole’, as Bank of the Bahamas had lost so much value as a result of its $120 million-plus losses over the last three-and-a-half years, this would never be recovered by the Government selling its majority 79 per cent equity holding.

Given the bank’s woes, and much-changed ownership structure, with the Government’s majority stake having increased from 51 per cent to 65 per cent, and now 79 per cent, there have been increasing suggestions that it should offer to buy-out the minority investors.

Mr Cash, though, suggested that such a proposal was likely to be rejected unless the Government offered terms too good to be true - something that is highly unlikely given its own fiscal difficulties.

“I don’t believe the minority shareholders will be interested in that unless the proposal is to make them whole,” he told Tribune Business.

“It cannot be a purchase for any fair market value, which is going to be abysmally low. To the extent that the Government has an interest in making the minority shareholders whole, I’m pretty sure people will consider that, but unless it’s on those terms it shouldn’t be something seriously entertained.”

Mr Cash added that there had been “a point in time”, when Bank of the Bahamas’ woes first emerged, where the Government had been urged to divest its majority shareholding in the institution.

This, he said, occurred when shareholders were informed that “a significant reason for the bank’s misfortune” was political interference with its decision-making, and the granting of loans to politically-connected persons.

However, Mr Cash said the time for the Government to exit the Bank of the Bahamas had long passed, given the huge destruction of value over the past three-and-a-half years.

“The issue now is that so much value has been lost,” he told Tribune Business. “The idea of the Government divesting its shares would be great for a buyer, who would be getting it for pennies on the dollar.

“That would not be viable from the taxpayer’s perspective, and the tremendous loss to the public purse because the Government used the bank for the narrow interests of a few.

“It’s the Bahamian people that stand to lose the most. I’m not sure whether divestiture is the best option or not from a public policy point of view. The bank has been overvalued for a long time.”

Bank of the Bahamas’ shares are currently trading at $1.77 on the Bahamas International Securities Exchange (BISX), but with no liquid market for the stock, and most shareholders wanting out, many observers believe the shares are worth cents on the dollar.

Tribune Business revealed earlier this month that minority shareholders in Bank of the Bahamas are moving to seek financial redress for the spectacular destruction of shareholder value caused by the $120 million in losses incurred over the past three years.

A class action-type legal action is among the options said to be under discussion. A spokesman for the organisers, speaking on condition of anonymity, told Tribune Business there was a collective determination among minority shareholders to obtain financial compensation for the dramatic decline in their investment’s value.

Declining to go into detail on how they would achieve this, the spokesman promised that the group would act “properly” and responsibly, and that the shareholders were not seeking to further damage Bank of the Bahamas or the wider Bahamian economy.