CDA: CUC write-off not possible

Although a write-off is favored by the Fitial administration, the Commonwealth Development Authority board is unlikely to agree to a debt forgiveness for the Commonwealth Utilities Corp. saying the matter had been settled by the Legislature years back.

“The possibility of write-off is not the direction the board wants to take. We have other viable solutions that would actually strengthen the operations of CUC,” said CDA board chair Tom Glenn A. Quitugua yesterday.

He did not issue details but said CDA will resume its meeting with CUC today to finalize their arrangement.

“We are waiting for solid numbers [from CUC]. For instance, we want to know where exactly CUC used those loans. We want to know how much CUC is spending for leases, contracts, and the like,” said Quitugua.

He said CDA’s actions would be consistent with the memorandum of understanding signed between the CDA and CUC on the $45-million debt settlement over two years ago.

He said the MOA actually wipes out a certain portion of the CUC debt and that the principal amount would be converted into preferred stocks.

The CDA earlier cited said that CUC’s debt reached over $103 million due to accumulated interests over the past years.

The MOA provides that the outstanding debt shall be satisfied by allowing CDA equity ownership in CUC through the issuance of cumulative, nonconvertible preferred stocks valued at $45.5 million.

Upon the issuance of the stock, as evidenced by stock certificates, the original indebtedness of CUC shall be considered cancelled and discharged, the MOA said. The CUC is given a three-year grace period to give dividend payments to CDA.

Meantime, Quitugua said they revisited the CUC issue starting last week, following instructions from Lt. Gov. Timothy p. Villagomez.

Villagomez, a former CUC executive director, currently has emergency control of the utility firm.

He has pushed for the write-off of CUC debt, citing that CDA merely acted as conduit for the distribution of these funds for infrastructure development in the CNMI.

Further, Villagomez said that CUC should not be asked to pay the money back since it is a public corporation and the funds were used for infrastructure development.

The 2003 agreement was amended in January 2004, setting forth the terms of their agreement.

But due to CUC’s state of financial crisis, it has been unable to make payments pursuant to the agreement, Villagomez had said.