Japanese firm offers $500M loan to NMI

Is the government broke and in need of money? A Japanese firm is offering to loan the CNMI government up to $500 million for infrastructure projects.

Takuyo Industries K.K., in an unsolicited proposal submitted on April 28, 2006 to the government, said it is willing to provide long-term infrastructure financing totaling $300 million to $500 million.

“This proposal has been prepared by Takuyo Industries on its initiative and not in response to a solicitation,” said Takuyo president Satoshi Yoshioka.

He said the financing terms would be highly competitive and flexible.

The proposal includes three options: Alternative A, B, or C.

Alternative A includes a loan of up $300 million, payable for 10 years at an interest rate of 6 percent per annum, while Alternative B is a loan for up to $500 million, payable over 10 years at 4 percent rate.

Plan A requires a guarantee by the CNMI government, while plan B requires a guarantee by the CNMI government and the U.S. government, or by U.S. government alone.

Alternative C is a combination of both A and B options, under which some funds would be guaranteed by the CNMI government alone and some would include the U.S. government.

These will be a 10-percent commission for all three alternatives, the proponent said.

“These terms are flexible and subject to reasonable negotiation,” said Yoshioka.

As for the federal government’s guarantee, the company said it would accept documents evidencing permission for the CNMI government to pledge future streams of federal grant or other payments.

Takuyo said it would prefer the issuance of one or more series of bonds, but it is willing to consider other means to secure repayment.

Likewise, it said that, although it prefers the sovereign guarantee of the CNMI government for all borrowed funds, “with adequate safeguards we are willing to consider financing revenue-producing projects with repayment solely from such revenues.”

Takuyo’s proposal was submitted to Finance Secretary Eloy Inos.

In an interview, Inos said the government has been getting similar proposals from different groups.

“The money market sees us as desperate for money,” he said.

Although this is correct, he said that the government could not just enter into any debt transactions.

“Yes, we need money but we have to go through the process. We have our own borrowing requirements listed in the Constitution,” he said.

A for the Takuyo Industries’ proposal, he said that it is “very exploratory.”

“That’s their offer on the table; we have not taken it. We have not done due diligence,” he said.

He said, though, that the company’s rate and flexible terms are a “good start.”

“If we’re going to negotiate, we’ll be asking for a lower rate,” he said.

In its proposal, Takuyo Industries cited that “the infrastructure of the CNMI is deteriorating and, in any case, is inadequate to meet the current and future needs of its residents and business community.”

It said the government needs to be able to provide first-class water, electric power, roads, school facilities, and other infrastructure to meet the current and future needs of its residents and businesses.

Takuyo Industries said it is involved in biotechnologically grown mushrooms worldwide, motion picture development, and software distribution.