The Tribune

• EY accountant takes over ‘frozen’ former PIB

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian bank, whose new owners pledged it would be “a standard bearer” for the jurisdiction just eight months ago, has been placed under statutory administration by the Central Bank.

The regulator, in a brief release last night, said Lucayas Bank - the former Private Investment Bank (PIB) - has been totally “frozen” while Igal Wizman, the EY (Ernst & Young) accountant and partner, determines the available alternatives for resuming banking services.

It is unclear why the Central Bank has delayed formally confirming this move for almost a month, as the statement said Mr Wizman was appointed back on October 27, 2021. However, its hand was likely forced by the statutory administrator issuing a formal communication to Lucayas Bank clients yesterday informing them of the institution’s precarious status.

Explaining that it was exercising powers given to it by the Banks and Trust Companies Regulation Act 2020, which was passed last year, the Central Bank affirmed Mr Wizman’s appointment as statutory administrator for Lucayas Bank.

“The statutory administrator is responsible for managing the operations of the bank,” the Central Bank said. “As of today, November 24, 2021, the administrator has communicated with the clients of the bank that the operations of the financial institution have been frozen ‘whilst alternatives to provide continuity of banking services are urgently considered’.

“The Central Bank is working closely with the statutory administrator in the discharge of his duties to oversee the affairs of Lucayas Bank, and to deploy an appropriate resolution plan that will protect the interest of depositors and creditors of the bank. The statutory administrator is providing regular updates to the Central Bank.

No explanation was given for why the Central Bank has taken this action. The timing also seems bizarre, given that it comes barely eight-nine months after the regulator itself gave approval for PIB’s purchase and its renaming as Lucayas Bank by the present ownership.

Several prominent Bahamians were named to Lucayas Bank’s Board post-acquisition, while others worked on the purchase itself. The bank’s directors include former PLP chairman, attorney Raynard Rigby; ex-FNM Senator under the last administration, Lisa Bostwick; and James Smith, former minister of state for finance and Central Bank governor.

Mrs Bostwick’s brother, John Bostwick, another former FNM senator, also acted as the Lucayas Group’s Bahamian attorney in the transaction. Tribune Business was last night told that the Board and all parties involved in the matter have been “gagged”, and Mr Bostwick declined to comment when contacted by this newspaper.

“I’m not too sure about the extent to which I am able to comment,” he messaged in a brief reply. However, well-placed Tribune Business sources revealed that the Central Bank’s action was driven by terms it imposed on the new owners for the recapitalisation of Lucayas Bank and the timeframe in which this was to take place.

The situation has its roots in efforts by the bank’s last owner, Banque Cramer, to sell its interest in the then-PIB. Banque Cramer previously thought it had disposed of a majority 85 percent stake in the Bahamian institution to IPG Securities Asset Management (Bahamas), and its principals, Carlos Molina and Jorge Carreras, in 2018.

However, the Central Bank subsequently demanded that Mr Molina resign from the bank’s board and dispose of his equity stake in PIB, plus any “affiliate businesses” in which the bank had an interest, by March 31 last year - a move that was upheld by the Supreme Court despite Mr Molina’s protestations.

This forced Banque Cramer to place PIB back on the market and seek a fresh purchaser, which it found in the Lucayas Group whose acquisition was subsequently approved by the Central Bank. However, under Messrs Molina and Carreras, the bank had acquired property at Goodman’s Bay opposite the Prime Minister’s Office, and this became the source of the regulator’s concern.

“They acquired a fixed asset, which impacted the bank’s capital and created other issues,” one source said. “The sale [to the Lucayas Group] was approved by the Central Bank with some conditions regarding the recapitalisation of the bank. One part of that was to sell the property purchased by the bank.

“They initially wanted to develop the property, but the Central Bank said ‘no’. It said that if you want to treat it as capital, you have to sell it and bring the proceeds back into the bank.” The issue then became the tight deadline set by the Central Bank for the property’s sale, which the source said was almost impossible to meet given how the real estate market functions.

“The Central Bank gave them a short timeline in which to do it,” the source added. “The bank’s principals will argue the Central Bank gave them some very tight deadlines in which to turn around the property.

“For a foreign person wishing to acquire property in The Bahamas, you need sign-off by the Investments Board, you have to establish a relationship with a Bahamian broker. They gave them just seven to ten days.”

The tension with the Central Bank, together with Mr Wizman’s appointment, was said to have sparked “somewhere between a run on the bank and clients getting cold feet”, which triggered several to pull their money put of the bank and resulted in the “freezing” of its operations.

All this is a far cry from when Lucayas Bank’s new owners unveiled plans on March 11 this year to expand its assets under administration to $1.5bn within two years. They added that they were already eyeing a tourism industry investment that could create “at least 75 full-time jobs” separate from the 24 staff it has inherited with the PIB deal.

“Because of the footprint of the group, but also the important network of the same, the group thought it could be the ideal solution to consolidate business in a business-friendly and stable environment such as The Bahamas,” Lucayas Group said of the acquisition, while declining to reveal a purchase price or any of the sale terms.

“The group is looking into growing its interest in The Bahamas as well as looking for new minority Bahamian partners, and hopes to expand further its Bahamian economic partnerships in future..... There are currently 24 staff in the bank. The target is to grow assets under management to $1.5bn in the next two years.

“This is perceived to be a realistic ambition given the pipeline of clients which exists, as well as new commercial hires and assets under management acquisition through additional purchases. While other banks are leaving or divesting from The Bahamas, we are heavily committed to growth.”

The Lucayas Group declined to reveal much about the identity of its major or controlling shareholders, only saying that its various companies have been operating for up to 20 years and the principal stakeholder is “an Anglo-Irish and American family trust with other individuals holding minority stakes”.