CPA’s interest payment suspended for three years

The Commonwealth Development Authority on Monday approved the three-year suspension of interest payments on the $6 million loan of the Commonwealth Ports Authority.

CDA board chair Pete Itibus said the decision to defer CPA’s interest payments for three years was unanimously approved by the board.

Besides the interest-free option, the CDA board also agreed to allow CPA to pay its loan principal in five years.

“The board provided five years suspension of their principal loan payments but after three years they will start making payments on the interest,” said Itibus.

The chairman said the decision was reached after looking over the financial situation of the agency, which is still working on its compliance with the seaport indenture agreement with trustee Bank of Guam.

“It’s a big help for CPA…” he said.

The loan was used for the agency’s seaport projects. Prior to this, CPA had requested CDA for debt forgiveness, which the latter opposed.

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

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

Due to the more than 60 percent reduction in seaport revenues, CPA was found in default of its indenture agreement, resulting in the declaration of a state of emergency at CPA last year.

Early this year, 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 said the increase was intended to prevent any takeover of seaport management by the trustee.

CPA executive director Efrain F. Camacho earlier said that the suspension of payment will help CPA comply with all the indenture issues. He said CPA is in “the right direction” toward compliance, saying they are now at 90 percent nearer their goal.

Because of the progress in seaport operations, CPA’s current financial position will enable it to meet its debt service coverage ratio of 1.25, Camacho said.

The new tariff rate is subject to quarterly assessment by CPA to determine if it is viable to continue its enforcement.