A RESOLUTION to accommodate a $40 million loan from the FirstCaribbean International Bank (Barbados) Limited for housing purposes has raised question marks about the financial viability of the National Housing Corporation (NHC).
Minister of Finance and Economic Affairs Chris Sinckler yesterday moved a resolution to approve the guarantee on the payment of the principal sum of a $40 million loan and interest to be borrowed by NHC from FirstCaribbean to finance the construction of residential houses for sale.
In his short presentation, Sinckler said the loan would go towards the advancement of Government’s Housing Every Last Person (HELP) initiative, which has already seen a number of projects in various stages of construction. He added a comprehensive evaluation and proposal had been made to the bank and that the agreement between the two entities demonstrated the confidence which the bank had in the NHC. However, Sinckler still noted that Government had to review the way in which the process of guaranteeing loans had evolved over the years.
He said the Guarantee of Loans Act had a $345 million threshold and thus far $244.9 million had been obtained. He indicated that the $40 million loan would not lead to Government “bursting” that limit. Sinckler revealed that $10 million had already been drawn down from the total amount.
But Opposition MP Dale Marshall questioned Government as to why it had turned to First Caribbean International Bank for financing rather than the traditional source, the Barbados National Bank (BNB).
The St Joseph MP stated the BNB had concerns about the financial status of the NHC and was unwilling to enter into a joint arrangement with the corporation. He even suggested that such was the financial state of the NHC that it reportedly had difficulty even paying salaries in a timely manner.
Marshall said the NHC’s financial situation was reflected in the draconian conditions attached to the loan which it had accepted from FirstCaribbean Bank. He said the bank had tied the interest on the loan to a possible downgrade of currency debt by any credit rating agency.
Marshall highlighted the specific concern of the arrangement which read: “Without prejudice to any other rights the lenders may have, in the event of a downgrade of the Government of Barbados’ local currency debt by any international or regional credit rating agency, the interest rate shall be increased by 25bps [basic points] for every sub-grade downgrade within the investment band grade.”
Marshall said this state of affairs was unfortunate since Government was dealing with a local banking institution where under normal circumstances there was usually negotiation and flexibility in terms of interest rates and other arrangements.
Marshall, a former NHC chairman, called on Government to state on what the $10 million already drawn down had been utilised. He asked Government to specify the housing estates which the $40 million would finance and queried what the NHC would be selling to facilitate servicing the debt.
During his contribution, St Lucy MP Denis Kellman laid the blame for any fall-out between the BNB and the NHC at the door of the former Barbados Labour Party (BLP) administration.
He said the former BLP government had entered into several joint ventures where the BNB suffered losses as the financing agent. Additionally, he said the former BLP Government had taken NHC land and given it to private land developers at reduced cost. He said rather than build houses for people as per its original mandate, the then government had entered into ill-conceived arrangements to construct buildings such as that at Warrens, St Michael. (WG)