Gov't To Rescue BISX Again
The Cabinet plans to rescue BISX if its shareholders agree to match the $450,000 the government intends to provide it through the Central Bank, the Journal has learnt.
This financial shot in the arm would come nearly two years after Bahamas International Securities Exchange (BISX) asked for $2 million in public funds.
A committee that was appointed to look into the affairs of BISX recently recommended that the Government of The Bahamas through the Central Bank "commit to continue its financial support of BISX for an additional amount of $450,000 over the next three years."
It also recommended that "it be proposed to the existing and prospective shareholders of BISX that an additional minimum amount of $450,000 to match the government's support be subscribed for by way of a rights offering."
Minister of State for Finance James Smith said Monday that Committee Chairman Julian Francis "was told to go back and speak with the private owners [of BISX] and see if they are in accord with the recommendations [of his committee]."
A Bahama Journal source close to the matter said Monday that "the switch has already been flicked and things are beginning to happen for BISX."
Recognizing the great need for an institution like BISX to the country's developing economy, the committee, recommended late last year that the exchange receive help.
This would not be the first time that BISX would be receiving financial assistance from a government-related agency.
In 2002, the Central Bank gave BISX $150,000.
Start-up costs and losses experienced during the first two years of operations resulted in BISX approaching the government in mid 2001 to provide substantial financial assistance to support the continued functioning of the exchange.
When the government announces the decision to help BISX, it will surely be met by some criticism from members of the private sector, some of whom argue that the government should not be in the business of bailing out private companies.
Even an official in the Ministry of Finance seems to share this view.
In observations presented to the Minister shortly after the latest report on BISX was released, she wrote, "The recommendation for a further $450,000 of government financial support is divergent to the mandate of BISX being capable of operating without government subvention. It is hoped that with the restructuring of BISX along with the implementation of the other aforementioned recommendations that BISX would become a more efficient, fully operational exchange that requires no government subvention."
The BISX report indicated that the existing shareholders in BISX are unwilling to inject any new capital in the exchange. But it said that existing shareholders and new shareholders may be willing to support the exchange if certain changes were implemented.
An earlier Journal story on the committee's findings revealed that the exchange's financial problems were compounded by lavish spending on items such as furnishings.
The report also pointed to a number of reasons why BISX faced financial troubles, including the exchange's cost structure, significant cost overruns on management consultancy fees and the lack of anticipated public policy support.
Candia Dames, The Bahama Journal