The move essentially makes CUC debt-free which will enable it to secure private or public financing for its future projects, said CUC Executive Director Antonio Muna during the governor’s weekly press conference.
“This opens the door for financing and a better line of credit for CUC,” said Muna. “This puts us in a better position in terms of capital acquisition and financing options.”
Gov. Benigno R. Fitial said the debt-equity agreement transformed CUC from a “worthless” entity with no assets to a $100 million corporation overnight.
“This is a move in the right direction,” he said.
The debt-equity conversion agreement is in line with the mandates of Public Law 16-17 requiring CUC to issue CDA shares of cumulative, non-convertible and non-transferable preferred stocks valued at $45 million.
CDA’s preferred stocks amount to 45 shares valued at $1 million each with guaranteed fixed annual rate of 2 percent per annum or about $900,000.
The agency, however, will only start getting its annual dividends starting fiscal year 2012.
CUC has the option to buy back up to $16.2 million of CDA’s $45 million preferred stocks through a “dollar for dollar” offset against the utilities agency’s future internally funded capital improvement projects.
The agreement’s signatories were CDA Chairman Pedro I. Itibus, Executive Director Manuel A. Sablan, Muna and the governor.
Joel Bergsma, the special legal counsel of the governor, said the debt-equity conversion agreement is still subject to the approval of the Commonwealth Public Utilities Commission, the regulating body of the CNMI’s private and public telecommunications and utility-related industries.
Bergsma, along with CDA’s counsel, Vicente Salas, reviewed the agreement.
Itibus said the deal signifies a renewed cooperation between the two autonomous agencies.
“I am very happy that we signed this agreement. This signifies cooperation between the agencies,” said Itibus and stressed that as stockholder of CUC, CDA’s next move is to assist the utility corporation in looking into other financial means to enhance its power generation service.
CDA and CUC signed a memorandum of agreement on the debt-equity conversion scheme in 2002 but the deal wasn’t consummated until now.
Officials hope the move will help the government privatize the power operation of CUC.
They said potential foreign investors are “turned off” by CUC’s huge liability to CDA.
