There are only six garment factories on Saipan and two of them are expected to shut down next month and in September.
In a five-page “Third Interim Bond Indenture Compliance Report” submitted to the Legislature and Gov. Benigno R. Fitial, Cabrera said CPA officials met with Ricondo & Associates regarding the $20 million airport bond indenture.
The consultant also met with representatives of international airlines, CPA tenants, Deloitte & Touche, the bond’s trustee — the Bank of Guam, the Marianas Visitors Authority and the administration.
Ricondo recommended that CPA increase its airline fees, among other charges to entities using its facilities to raise enough funds to pay for the airport bond.
Cabrera said Ricondo will make recommendations based on its findings.
Aside from losing substantially due to the weak garment and tourism industries, Cabrera noted that CPA also incurred “a substantial loss resulting from the check-kiting scheme by Information Data Services back in Oct. 2006.”
“IDS prepared the payroll for CPA as it did with other companies like Mobil, PIC and World Resort. The FBI raided IDS and froze all accounts. Checks with IDS had written back to CPA as a result of the suspension of the retirement contributions, were insufficient and rejected by the bank,” reads a footnote of Cabrera’s report.
“As a result, CPA did not remit employer and employee contributions for several months. NMIRF issued demand letters and CPA has been paying back this amount in installments of approximately $40,000 per month,” he added.
CPA’s arrears with the Retirement Fund will be fully settled by Sept. 2009.
Cabrera noted that CPA’s dwindling revenue is taking its toll on the $6 million seaport bond indenture paid every month at $68,000.
He said the debt-service ratio for the seaport bond is at .84 well below the required 1.25.
“The debt service coverage will become deficient given this drop in revenue prompted by the closure of garment factories and the decrease in seaport revenues,” he said.
The move will not only affect the local shipping industry but consumers as well who are already facing a record high inflation due to soaring fuel prices.
