Gov’t, BOG sign $30-M interim financing for CIP

Gov. Pedro P. Tenorio has signed an agreement with the Bank of Guam in connection with the $30 million loan for the implementation of capital improvement projects which have been delayed due to lack of matching funds.

Interest rate on the loan was pegged at prevailing market rates.

The signing of the loan agreement on Feb. 18, 2000 was witnessed by Finance Secretary Lucy Nielsen, Attorney General-designate Herb Soll, CDA Board Chair Juan S. Tenorio, CDA Executive Director Marylou S. Ada and Bank of Guam general manager Marcie Tomokane.

The $30 million loan will be repaid from proceeds of the planned $60 million bond float in June. The Commonwealth Development Authority CDA has chosen Paine Webber to underwrite the tax-exempt municipal bond.

This developed as the CUC board has given the go signal to utilities firm Executive Director Timothy P. Villagomez to study the debt-to-equity conversion scheme with CDA.

Since 1976 CUC has not made any payments to CDA for its $100 million debt despite a default letter issued by the Development Authority in 1995.

Ms. Ada stressed that under the loan agreement, CDA can just takeover the management of the utilities firm but the agency has no plans of doing so.

“We will not even take CUC to court because we want to settle this among us,” she said.

Amid efforts to carry out a $60 million bond float, Mr. Tenorio expressed concern that failure of CUC to start paying for its loan might send wrong signals to international lending institutions.

With the failure of CUC to resolve the controversial 80-megawatt power plant project, CDA has temporarily shelved the debt-to-equity conversion plan. The utilities firm’s debt to CDA has ballooned to $105 million from $61.3 million in June 1997.

Some $10 million of CUC’s loan to CDA was used to pay Japan’s industrial giant Mitsubishi for some of the island’s generators.

The CUC board has withheld the selection of a firm that will build the 80-megawatt power plant pending assessment of the need for the project with such magnitude.

At the same time, Mr. Villagomez emphasized that Burns & McDonnell, an independent firm that evaluated results of the various bids on the controversial Saipan power plant project, has recommended that the utilities firm settle its debt with CDA.

Before any debt-to-equity conversion can be carried out, an amendment to the CUC statute must still be made by the Legislature to clarify some issues such as the number of board seats CDA must hold in the CUC board.