The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has failed to extract itself from a furious legal battle sparked by accusations that its failure to make due rental payments on the Eight Mile Rock administrative complex has caused one of its first-ever public-private partnership (PPP) deals to default on a $25m bond.

The bust-up has emerged due to Leno Corporate Services, the Bahamian financial services provider that structured and issued the bond, launching Supreme Court legal action against both PPP Investments & Construction Company, the private sector partner that built the Grand Bahama property, and the Ministry of Finance following the former’s failure to meet its repayment obligations.

PPP Investments & Construction Company, which has “admitted to the majority” of Leno’s accusations and is only disputing the amount owed, has now joined the financial services provider in blaming the bond default on “the Ministry of Finance’s failure to pay” it the rent due on the administrative complex named after the late Cabinet minister and MP, Obie Wilchcombe. The deal was signed-off by the last Christie administration just one day before the May 10, 2017, general election.

The financial mess is detailed in an April 10, 2026, Supreme Court ruling by Adrienne Bellot, its acting assistant registrar, who rejected the arguments by the Government for the Ministry of Finance and Attorney General’s Office to be removed as defendants to Leno’s action. She ruled that the financial services provider’s claim must move forward to be heard by a judge.

The Government had argued that the Ministry of Finance could not be sued by Leno because the latter’s agreement over the $25m bond was solely with PPP Investments & Construction Company - meaning that there were no contractual ties binding the ministry to the Eight Mile Rock financing deal.

However, Devard Francis and Alecia Bowe, the respective attorneys for Leno and PPP Investments & Construction Company, successfully argued that the law is much more flexible than allowed by the Government.

They asserted that the Ministry of Finance “is directly and substantially” involved in the bond agreement and structure, not least because it had at one stage made direct rent payments to Leno, and that its failure to make timely and full payments to PPP Investments & Construction Company was the root cause of the default.

Leno, in its February 20, 2025, statement of claim, alleged that PPP Investments & Construction Company had “breached the financial bond agreement” the two sides entered into some seven years before on February 12, 2025. Tribune Business records show the bond, which was issued to raise most of the necessary financing to construct the Eight Mile Rock complex, carried an 8 per cent interest coupon and 10-year maturity meaning that investors are due to be repaid all principal in early 2028.

The Bahamian financial service provider also claimed that “the Ministry of Finance was responsible for paying rent to PPP Ltd, but alleged breach of such obligation by reason of PPP Ltd’s failure to make timely payments”. PPP Investments & Construction Company, in its defence, “admitting the majority of the assertions… but disputed the sums owing to Leno”.

The Attorney General’s Office, acting as the Ministry of Finance’s legal representative, then made an application under the Supreme Court’s civil procedure rules for the ministry to be removed as a defendant on the basis that it did not have a contractual relationship with Leno.

“In support of its privity of contract argument, Ministry of Finance submitted that Leno’s claim is for breach of the financial bond agreement between Leno and PPP Ltd. Since the Ministry of Finance is not party to this contract or any other contract with Leno directly, Leno cannot sue Ministry of Finance on the financial bond agreement,” the Supreme Court said of the Government’s position.

“In response thereto, Mrs Bowe and Mr Francis contended that the doctrine of privity of contract is no longer applied inflexibly. The Ministry of Finance participated in the performance of the financial bond agreement, which was part of the overarching public-private partnership between the Ministry of Finance and PPP Ltd. The claim on the financial bond agreement arose due to Ministry of Finance’s failure to pay PPP Ltd, which then caused PPP Ltd to default on its obligations to Leno.

“They assert that the Ministry of Finance is directly and substantially involved in the operation of the contractual structure - the financial bond agreement - that underpins the public-private partnership, which was made under the mechanisms provided in the financial bond agreement,” the Supreme Court added.

“In particular, Mrs Bowe asserts that the Ministry of Finance made direct payment to Leno, which she regards as clear evidence of contractual performance and demonstrates acceptance of the obligations arising under the financial bond agreement, including unmistakable intention to satisfy the outstanding debt.”

Leno’s accusations surrounding the Eight Mile Rock administrative complex are likely to raise fresh questions about the Government’s cash flow pressures, and whether it has sufficient liquidity to meet all its obligations in a timely manner despite forecasting a $75.5m Budget surplus for the 2025-2026 fiscal year, as well as the nature and structure of many ‘PPP’ arrangements that it has entered into.

The Supreme Court, while conceding that Leno’s initial pleadings and claim were “noticeably vague”, found that the merits of the financial provider’s claim and the Government’s bid to remove the Ministry of Finance were “now somewhat inseparable” given that the dispute over whether the latter is part of the bond contract lies at the heart of the case.

And, noting that PPP Investments & Construction Company has applied to change its defence to make its own claim against the Ministry of Finance, Ms Bellot ruled that “it would not be appropriate for me to grant the removal application”.

Tribune Business records show that, just over three months after Leno launched legal proceedings on the Eight Mile Rock administrative complex bond, the arrangement suddenly appeared in the Government’s 2025-2026 Budget - not as a rental payment but, rather, a loan debt.

The deal appeared under the ‘public debt servicing - interest and other charges’ heading, noting a $33.93m, ten-year loan due to PPP Investments & Construction Company even though this debt was supposed to have been serviced by rental payments. The PPP had initially been billed as a lease-to-own structure where the Government would pay back the company and its lenders via rental payments.

Besides the $25m bond, the balance of the $34m Eight Mile Rock complex’s funding - some $9m - was obtained from Sygnus Capital, the Jamaican investment and alternative financing house. However, it has now appeared in the Government’s books as a “loan” that has to be repaid by Bahamian taxpayers. Some $2.308m is due to be paid in 2025-2026, with payments of $2.094m and $1.874m due in 2026-2027 and 2027-2028, respectively.

One source, familiar with the Eight Mile Rock complex deal and speaking on condition of anonymity, told Tribune Business: “It was fraught with challenges - any number of challenges. If that is supposed to be paid by rent, why is it showing up on the Government’s books as a loan. The Government has to explain why we are seeing rental payments as a debt. The answer is to avoid counting it as recurrent expenditure. It should be in the recurrent items.”

The $25m bond default will likely have caused Leno difficulties with the investors who bought into the debt security, which is effectively an ‘IOU’ committing the borrower to make scheduled interest and principal payments to them on time. The bond offering documents asserted that the Government will pay a fixed quarterly rent of $852,224, or $3.409m per year, to PPP Investments & Construction Company throughout the duration of the initial 10-year ‘rent-to-own’ lease.

Once the debt is fully paid off, the two buildings comprising the Eight Mile Rock complex were to be conveyed to the Government for $100. The latter was to pay PPP Investments & Construction Company a $535,000 'handover fee' once construction of the complex, named in honour of the late ex-tourism minister, Obie Wilchcombe, was completed. It opened in 2023.

The first building was to be 33,000 square feet, and feature three floors to be used as a Government administrative building to house NIB (National Insurance Board) and other local government-related offices. Building 'B' was to be 13,000 square feet with two floors to be used as a court house, a police station and a fire station.

Among the prospective tenants were the Ministry of Finance, Passport Office, Department of Environmental Health, Urban Renewal, the Registrar General's Office and the Grand Bahama island administrator.

Tribune Business records show that PPP Investments & Construction Company was formed in late November 2016 as a special purpose vehicle (SPV) specifically designed to construct and manage the Eight Mile Rock administrative complex. It was 100 per cent-owned by New Providence-based Top Notch Builders, which is located on Adelaide Road.

Its principals included Samson Heild as lead contractor; financial consultant Marc Robinson; and building/consulting engineer, Randolph John. Winston Rolle, the former Bahamas Chamber of Commerce president, was listed as a director in the offering documents, and it later emerged that Mrs Bowe, the attorney now defending it in Leno’s action, is also a director.

This newspaper’s archives show that the Minnis administration allowed the Eight Mile Rock project to proceed despite clear misgivings over the last-minute deal it had inherited from its Christie predecessor. Desmond Bannister, former deputy prime minister and minister of works, had described a $4.4m 'advance interest payment' to PPP Investments & Construction for 'initial funding construction’ as "inconceivable".

PPPs are typically designed to reduce the financial stress on cash-strapped governments by contracting the private sector to provide the funding, development and expertise to construct much-needed infrastructure or run public services.

The Government’s cash flow pressures are eased by requiring the private sector to finance the up-front capital costs, with the latter earning a return on investment - and paying back any lender - from the revenue streams generated by infrastructure assets they develop or services provided.

The Opposition has previously argued, though, that several projects touted by the Davis administration as PPPs do not fit this model or meet this criteria and, in reality, are off-the-books loans designed to keep debt off the Government’s balance sheet and prevent it from adding to the annual deficit and $12bn-plus national debt.

Kwasi Thompson, the Opposition’s finance spokesman, said yesterday: “We especially need all the details related to the off-book, undeclared debts that they continue to pretend are public-private partnerships (PPPs), but for which their own Fiscal Responsibility Council has properly characterised as undocumented liabilities on the backs of Bahamian taxpayers.

“These hundreds of millions of dollars in off-book loans must be properly recorded in the pre-election [fiscal] report so that the Bahamian people can see the entire truth and fully appreciate how much the PLP has been hiding from the Bahamian people. It is embarrassing that the Fiscal Responsibility Council, the IMF and now Fitch has commented on the need for transparency with PPP commitments.”