Commonwealth Development Authority Executive Director Manuel Sablan confirmed to Variety that they signed an agreement with Arctic Circle Air and Independence Bank last week.
Sablan said, “Independence Bank would be providing essentially the financing.”
Asked how much the Rhode Island-based bank forked out for Arctic Circle, Sablan replied, “Initially, there is an interim loan of $600,000 to purchase the aircraft, insure it and make sure it’s delivered.”
Sablan also said the bank approved the loan which was secured by the CDA’s cash deposit of 600,000 into a reserve, pledged account for purposes of the Arctic Circle to purchase the aircraft.
On Tuesday, CDA comptroller Stuart B. Smith confirmed to the DCD board the disbursement of the $600,000 for Arctic Circle.
Sablan, in an interview with Variety on Tuesday, said the loan agreement was predicated on a condition the bank would go on to provide a USDA guaranteed loan for the amount that would sufficiently finance the entire project.
Sablan disclosed to Variety that Arctic would be able to secure a $2.7 million loan from Independence Bank to be guaranteed by USDA.
He also said that once the $600,000 interim loan has been consummated, the $600,000 that CDA deposited into an escrow account would be released for CDA’s equity contribution into the Arctic Circle corporation.
Sablan also said the total project financing involves equity — stocks and loans. “The equity has been provided by the private shareholders that bought into the corporation plus CDA.”
He said that not only did the corporation meet the minimum equity contribution, it’s enough for the company to qualify for a bank loan to be guaranteed by USDA.
Variety asked Sablan from which account did the $600,000 come from, Sablan said, “Money came out of the Development Corporation Division funds —loan funds.”
Previously, Arctic Circle Air had been approved in principle by CDA for a $600,000 investment and for $500,000 MPLT loan.
The MPLT loan approval was contingent on CDA’s approval of the $600,000 investment.
But Sablan confirmed to Variety that Arctic decided to go for applying for a loan with Independence Bank rather than go through MPLT.
MPLT, on the other hand, during its board meeting last week had yet to receive official correspondence from Arctic indicating the pull out their proposal.
For Sablan, Arctic decided to go for the Independence Bank loan arrangement as the MPLT loan and the CDA equity position would not be enough to sustain the operation.
“Under the Independence Bank arrangement, they would have sufficient cash flow to finance the operation, purchase the aircraft — [enough] to sustain a viable operation,” Sablan said.
Asked what type of loan Arctic is looking to secure with USDA guaranty, Sablan said, “commercial.”
As to the terms, Sablan said Artic and Independence Bank as well as USDA have yet to negotiate.
New CDA comptroller
The CDA may be hiring a new comptroller soon.
Sablan told Variety that the CDA board had already made a choice on a potential replacement for Stuart B. Smith.
Sablan said they could not disclose the identify of the possible replacement as they are still negotiating the terms of the annual contract.
From three applicants, the field had been winnowed down to one potential candidate.
“No contract has been signed yet,” Sablan said.
He, however, said the candidate would have the same scope of work as Smith’s.
As for the audit of the CDA’s financials for FY 2011, Sablan said, “We were almost finished with the audit. I am pleased. Stuart is really working hard to get this one.”
Smith delivered his final comptroller report before the DCD board of CDA last Tuesday.
Credit initiative
With regard to their participation in the federal State Small Business Credit Initiative program, Sablan said they should have enough money in the cash reserve to keep the program running.
He told Variety in a separate interview that the $600,000 cash deposited into an escrow account for Arctic Circle came from DCD funds and did not come from what the agency would be reserving for their loan guaranty program under SSBCI.
Sablan said CDA anticipates having enough to be put into the reserve account with money collected from loan repayments, among other sources.
