The CI$19 million the Cayman
Islands government is seeking to borrow on behalf of Cayman Airways will go
toward refinancing some of the airline’s current debt.
That debt, according to information
obtained by the Caymanian Compass, includes unpaid landing fees the national
airline owes the Cayman Islands Airports Authority and the balance of a $5
million loan taken out by government to assist the airline.
Neither Ministry of Finance
officials nor the Airports Authority would discuss exactly how much in
landing/parking fees is owed by the national airline. Government budget figures
showed Cayman Airways is scheduled to pay about $1.5 million in landing/parking
fees for the current fiscal year.
The ministry declined to release a
breakdown of what the $19 million financing would be used for.
“The $19 million proposed borrowing
is a refinancing of existing historical informal debt of Cayman Airways related
to the historical shareholder deficiency,” a government statement released to
the Caymanian Compass said. “The refinancing will allow the national airline to
continue to function more effectively as a strategic driver of tourism growth
and economic development.”
Typically, refinancing agreements
are entered into to reduce the interest rate being paid on current debt. This
essentially means the entity doing the refinance is seeking to pay less for the
money it borrows.
However, terms of the total US$185
million loan for the Cayman Islands government – of which the CI$19 million is
a part – have not been finalised, according to Premier McKeeva Bush. The $19
million in borrowings for CAL were also not included on either of the two
public tender documents released seeking financiers for the US$185 million.
Speaking before the Legislative
Assembly earlier this year, Cayman Airways Board Chairman Jude Scott said the national
air carrier had amassed between $50 million and $51 million in what were
described as “under-funded losses” over a period of years.
That will have to be paid back by
the Cayman Islands Government within the next 10 years, according to testimony
before the Legislative Assembly’s Finance Committee.
According to government officials,
some of that debt is current; some of it is not.
The under-funded losses were
largely separate from the issues the $19 million in borrowing was being sought
to address, government officials said. Mr. Scott told Finance Committee members
that the losses mounted following chronic under-funding by government. To make
up the difference, Mr. Scott said the airline often had to borrow money.
“In some cases they were formal
borrowings, and in some cases they were informal borrowing,” he told the
committee.
Typically, the airline had to find
between $3 million and $4 million to fund principle repayments on those amounts
and they just added up over time.
“We clearly recognised…such a
deficiency in the capital would need to be rectified,” Mr. Scott said. “There
was an agreement reached that over a 10 year period the government would fund
that amount.”
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