More gov’t backing for Turtle Farm

The Cayman Islands government will go further into debt in order to help the cash-strapped Boatswain’s Beach tourist facility refinance its loans and shore up its operating position.

The move is expected to free up more money in the short term to defray the facility’s operating and construction expenses, according to Financial Secretary Kenneth Jefferson. It will also extend the amount of time Boatswain’s has to pay back some US$15 million in loans it owes.

‘There’s not a tremendous amount of increase in new debt,’ Mr. Jefferson told members of the Legislative Assembly Monday. ‘The impact is fairly negligible.’

The refinancing portion of the deal involves two loans made to the facility in 2006. Those loans totalled US$13.8 million.

The new borrowing includes an additional US$1 million that was secured by a lien on government property. That will now be rolled into the refinancing agreement with a new bank, totalling US$14.8 million in outstanding loans that are being guaranteed by the government.

Government coffers will also guarantee another US$5.5 million to secure an existing overdraft account at Boatswain’s Beach. The tourist facility had this in place previously, but the banks did not require a guarantee from government for it.

‘Until recently the bank was satisfied with a letter of comfort on the overdraft facility,’ Mr. Jefferson said. ‘This is not new debt (for the Turtle Farm).’

The refinancing agreement will significantly cut the amount Boatswain’s Beach must pay each year on the loans it owes. Under the previous financing plan, the loans required about US$2 million each year to service. Under the new deal, that amount will be about US$800,000 a year.

The repayment period will be extended from 10 years to 15 years.

‘We’re just taking some of our short term debt and refinancing it at a lower interest rate, which allows us to free up some of our cash flow,’ Turtle Farm Managing Director Joey Ebanks said prior to resigning on Wednesday.

Under Cayman Islands law, government’s ‘net debt’ must not exceed 80 per cent of total core government revenues in any given year. Net debt is a complex calculation of what debt repayments are owed by central government, statutory authorities and government companies after subtracting core government’s liquid assets.

Mr. Jefferson said the Turtle Farm refinancing, while adding some US$6.5 million to government’s contingent liabilities, will only increase the net debt amount by less than one percentage point.

Guarantees for the loan repayments are only part of the financial commitment the Cayman Islands government has given over the last few years to support Boatswain’s Beach.

Figures presented to the Legislative Assembly’s Finance Committee in 2008 revealed that the facility had sustained an operating loss of more than $20 million over the last three years. That operating loss does not include loans taken out to keep the facility afloat.

At one stage in late 2007, the Turtle Farm was losing about CI$500,000 per month on operating costs. That had improved through last year, but Mr. Ebanks said the recent downturn in the global economy is having its effect on Boatswain’s Beach, just as it has the rest of the tourism industry.

‘We still have losses,’ he said. ‘I said back then (in 2008) it was going to take about three years to turn it around and that was before the global economic crisis set in.’

Mr. Ebanks said Boatswain’s is trying to do more first-person marketing to islands visitors via its website and ‘eliminate the mark up’ placed on cruise ship visitors who book trips. He said individuals who book their own trips to the Turtle Farm will pay US$45 a person, while cruise ship visitors can pay anywhere from US $70-$94 per person. However, a large portion of what cruise passengers pay goes to the booking cruise lines and not to the Turtle Farm.

The move is expected to free up more money in the short term to defray the facility’s operating and construction expenses.

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