Five-year suspension of CPA payment for $6M loan OK’d

The Commonwealth Ports Authority was granted a five-year relief of its obligation to the Commonwealth Development Authority after the latter agreed to suspend without penalty or interest the remaining loan of the ports authority.

CPA executive director Efrain S. Camacho disclosed this to the board of directors during a special meeting Thursday, citing that the move is in line with the CDA’s effort to assist the ports authority, which is in default of its obligation under the seaport bond indenture agreement.

Saipan Tribune learned that from the original $10 million loan made to CPA years ago, the agency had incurred an outstanding balance amounting to $6 million after it failed to pay its obligation on time.

“The CDA has agreed to suspend without penalty or interest for five years the loan to CPA. The balance remaining is about $6 million on an original amount of about $10 million,” Camacho told the board, adding that the loan granted by CDA was used in the agency’s seaport projects.

The CDA’s decision takes the place of debt forgiveness or a deferment of payment of up to three years only, as earlier recommended by CDA.

The remaining loan, Saipan Tribune learned, would result in some $68,000 in monthly payments to CPA, if no suspension is made.

The CPA’s response to the initial options offered by CDA was delayed as it waited for the completion of the seaport rate study, which was used as a basis for implementing rate increases in all seaport activities.

Due to the more than 60 percent reduction in seaport revenues, the agency was found in default of its indenture agreement. This resulted in the declaration of a state of emergency by the Fitial administration.

This month, the CPA board approved a 90-percent hike on seaport fees and activities in line with the cost-recovery measures eyed for its indenture agreement. CPA had earlier said the increase was intended to prevent any takeover of seaport management by the bank.

Camacho said the suspension of payments will help CPA comply with all the indenture issues.

“It would be a big help to the agency in its effort to fully comply with the bond requirements,” he told Saipan Tribune, adding that CPA is in “the right direction” to compliance.

Because of the many progress noted in the seaport operations, Camacho said the seaport is projected to meet its debt service coverage ratio of 1.25 due to the tariff rates increase effective this month.

“But the management is aware of the volatility of the revenue tons and the continuing downward trend. For this reason, it will be necessary to lower expenses where practicable and ensure realized revenues are in compliance with the forecasted estimates,” Camacho said during the board meeting.

He said new rates implemented at the seaport will be evaluated and assessed after three months. From its results, CPA will determine if there’s a need to continue or adjust the rates of the stakeholders.