Arctic Circle still scrambling for capital

After rejecting an initial $500,000 loan from the Marianas Public Land Trust due to its stringent terms, Arctic Circle Air officials have once again approached the trustees Friday seeking for a lower amount for its planned cargo airline.

But after a lengthy presentation by its top officials Herman Guerrero and Paul Zak, three members of the board denied giving the company preliminary or conditional approval for the $235,000 loan proposal.

Trustees Gregoria Omar, Melchor Mendiola Jr., and vice chairman Peter Cruz defeated a motion to approve in principle the loan proposal as recommended by trustee Alvaro Santos. Newly elected chairman Pedro Guerrero inhibited himself from the discussion citing personal conflict of interest.

The three trustees expressed reluctance in agreeing with the Arctic Circle’s proposal without seeing something structured in black and white that will guarantee the loan repayment.

They emphasized the need for collaterals to safeguard the MPLT in addition to securing both Gov. Benigno R. Fitial and the Legislature’s commitment on the loan agreement. They instructed company officials to work with the board’s legal counsel and consultant in preparing necessary documentation for the loan proposal.

According to Arctic Circle officials, the CNMI government stands to benefit from the cargo airline business through collection of BGRT from the company, amounting to $500,000. They presented to the board a cost-impact analysis where they enumerated the projected rate of returns for all parties concerned.

They revealed that the $235,000 loan will be utilized in the physical delivery of the aircraft which is undergoing inspection in England and is securing certification from the Federal Aviation Administration.

They said Arctic Circle intends to repay the loan in less than three years. For the loan collaterals, they said some investors have identified several properties to commit. Confident of the strong support they got from some lawmakers and the administration, Arctic Circle officials said the business has strong potential to become successful.

During Friday’s meeting, it was disclosed that besides the new loan proposal to MPLT, officials of the company said they also applied for a $3 million loan from the Independence Bank with the backing of the U.S. Department of Agriculture. This loan is still being processed with a proposed payment term of 10 years with roughly $23,000 per month. In the event the company fails to secure any of these loan proposals, its officials said contingency plans were also identified to mitigate the risks.

Arctic Circle plans to start transporting local produce from the CNMI to Guam in March this year.