Late payments and a slight rise in delinquency are among the problems Scotiabank is seeing when it lends to tourism-related businesses in the tough economic times.
The bank’s director of credit solutions, Roger Best, made this admission yesterday during the third quarterly meeting of the Barbados Hotel & Tourism Association at Hilton Barbados.
Best said the troubles facing some of its clients in the tourist industry included reduced hotel occupancy and limited cash flow.
“What we have seen is a lot of late payments from some clients,” he said. “Delinquency has climbed a little bit and because of that we have had to do certain things to assist our clients through these tough times.”
According to Best, temporary overdraft facilities, longer loan repayment periods, a moratorium on payment of the principal, debt consolidation and the waiving of some covenants are among the programmes the bank has used to help borrowers in the tourism sector.
“As a result of lack of cash flow, naturally, there are certain covenants and conditions of our facilities that clients would not meet,” he explained.
“Banks typically require clients to meet certain thresholds – debt service ratios, equity ratios, various leverage ratios, etc. – and because of the lack of cash flow a lot of these ratios would tend to be breached and therefore we have waived a lot of those covenants during this period of time so that that would not be a hindrance in terms of the administration of the client’s facilities . . .”
The banker said the financial institution was providing funds to help businesses carry out renovations, something which would allow the assets to maintain or improve their value.
“We have seen how this recession has affected our customers,” he said. “We were there with them in the good times. We were doing well at that point in time, they were doing well and, therefore, it is fair for banks to work with their customers during these difficult times.
“We are a stakeholder in their business as well, and it is incumbent on us to work with our customers during this time, and a lot of what Scotiabank has been doing really is working with our customers through the difficult times . . . by sitting down with them and working out various options and various financial solutions to assist them.”
Best made the comments during a panel discussion, a high point of the meeting. (TY)
