THE National Housing Corporation (NHC) is bankrupt, broke and unable to honour its debts.
Chairman Timothy Mangal made the announcement Tuesday at a press conference. He puts the Corporation’s insolvency squarely on the shoulders of the previous administration and the house and land deals it made with foreign companies such as Bau Panel Systems, the Levity Group and other contractors.
“The NHC is broke. There is about $2 million it has to honour which it cannot honour. This is not counting the judgement it has against it as a joint venture partner with Bau Panel Systems,” Mangal said, adding that the foreign company has disappeared leaving the NHC holding the bag.
“Bau Panel has disappeared, NHC stands alone,” Mangal said.
The Joint venture Mangal speaks about has its origin in August, 2011 when officials from the National Housing Corporation, including Housing Minister Richard Frederick and Bau Panel Systems Limited signed a contract to officially launch a new housing project. At the signing ceremony it was said that 500 homes would be built. Frederick, at the time, said that the future homes would be available at a reasonable cost to Saint Lucians. The Government of Saint Lucia seeded the land parcels to the NHC in order to facilitate the needed housing scheme.
A new government was voted in soon after the contract signing between the NHC and Bau Panel Systems Limited in November, 2011. The new NHC Board of Directors completed the formation of a Joint Venture Company (JVC) between Bau Panel Systems Limited and the NHC. The NHC was afforded 49 percent share ownership in the new company and Bau Panel Systems Limited 51 percent.
According to a document in the possession of this reporter it was agreed that upon committing the land there was to be a contemporaneous arrangement wherein the developer, Bau Panel Systems Limited would place in escrow the raw market value of the land at the point where the Joint Venture Company would be in receipt of the property. The land in question was 58 acres in River Doree, Choiseul.
Sadly, the entire property was transferred with no escrow account as per the agreement and disagreements between directors of the Joint Venture Company and the failure by Bau Panel Systems Limited to capitalize the project prompted legal action to dissolve the joint venture and seek from the courts a return of the property to the state.
Success in that matter hinges on the outcome of a case in which the NHC was sued for unpaid infrastructural works costing $5,466,423.56 relating to the housing project in River Doree, Choiseul.
It appeared that the joint venture had informally permitted a company known as Master Builders to continue with infrastructure works originally commissioned by the NHC. This later transformed into the NHC being indemnified from claim by Master Builders, according to the document, which also claimed that a contract was never secured from the joint venture company for continuing with the scope of infrastructure works estimated to cost EC$16 million.
“After unsuccessful attempt to seek payment arrangement from both the NHC and its JVC legal proceedings were lodged against the NHC. The court has granted an Inhibition Order in favour of Master Builders prohibiting any activity or transfer of interest on the property without due regard for the interest of claim by Mater Builders Ltd, being first considered,” document stated in part.
An unsuccessful attempt was made to have the court set aside the order. A Mediation Agreement was obtained at a court hearing in May of this year and a recommendation made of $4 million as a form of compensation which has yet to be ratified. The matter is still pending and closure is not yet in sight.
According to Mangal, with this matter still ongoing the sum adjudged to the contractor by the court is accumulating interest of over $871 per day. He said that to date this amount is now over $7 million.
He said that to make matters even worse the former administration signed a similar agreement it has with Bau Panel Systems Limited with another company called the Levity Group which states that all of the land to be developed would be transferred to the Levity Group.
“Fortunately for us no property in that arrangement was transferred,” Mangal said.
He added that on the eve of the June 6 general elections another agreement was signed with another company, the name of which he withheld, because the NHC Board of Director is in discussion with that entity hoping to find an amicable solution. The land in question is in Talvern, Babonneau.
“In that agreement the land is to be transferred to that foreign company. What is even more shocking in that agreement is that the foreign company is not required to put in any money in that investment until 60 percent of the development is pre-sold,” Mangal said.
“We were getting a bad deal with all these situations and as a result of that the NHC has found itself in the position that it is,” Mangal said.
What on earth is going on in Saint Lucia?
Is there any Statutory body that’s not engulfed in debt or on the verge of bankruptcy?
Week after week, we’ve had this steady parade of announcements of entity after entity in financial strife – Tourist Board, City Council, Bank of Saint Lucia, and now the NHC.
Yet. instead of dumping that culture of inefficiency and waste, tightening their belts and preparing for a hard, long slog to dig our island out of this enormous hole in which it finds itself, we are doing the exact opposite.
We’re carrying on on our merry way, like everything is hunk-dory and like we’re flush with cash.
It’s simply incredible that GOSL is wittingly depriving itself of $70 million in revenue through cuts in VAT and license fees and moratoria on taxes. It’s bad enough this is being done against all contrary advice from financial agencies near and far. It’s worse that it’s being done in fulfillment of an ill-advised campaign pledge and on the basis of fuzzy economic logic that the cuts will encourage consumers and companies to spend more. At the very time Government should be encouraging people to save, it’s inciting them to continue to splurge. This move flies in the face of conventional wisdom, that economies grow when jobs are created and when new job holders spend.
Did GOSL consider investing that $70 million in a public-private sector venture with that generates good, long-term jobs? Did if think about using that money to meet its commitments to the DSH project? Does GOSL even know how much it will cost to build a new sanitary landfill for the south, especially as the soils in the area are not suitable?
We seem hell-bent on worsening our island’s plight. SLASPA – the only statutory authority that is not now in deep financial straits, continues to operate two airports, when one is losing millions and is slowly but surely pushing SLASPA into debt. Already, SLASPA is saddled with an underperforming seaport in the south and is unable to finance critical infrastructural improvements to the seaport in Castries.
It’s only a matter of time before the chickens come home to roost and we begin to fully see the folly of building 2 full-fledged hospitals, a mere 90-minute drive apart. It’s anybody’s guess how we will be able to compete with mature healthcare facilities in Cayman Islands, Trinidad and Tobago and elsewhere in the region. How will we will compete when we are unable to recruit and retain competent doctors and nurses and maintain these facilities? Where will the money come from to do these things when the vast majority of Saint Lucians can’t afford to pay for healthcare?
We’re making a total hash of running this small island of 160K people. Only Sir John seemed to appreciate the importance of Saint Lucia living within its means. Sir John understood there were certain things we had to do ourselves like funding our recovery from natural disasters. What monies have we set aside for this? Will we rely on loans when our debt to GDP ratio in such bad shape?
We’re at the abyss. The IMF awaits. Maybe this is the wake-up call we need to come to our senses.