Seaborne makes $4M loan payment to GERS
Published: December 20, 2013
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ST. THOMAS - Seaborne Airlines informed the Government Employees Retirement System that the $4 million the airline owed to the pension system was paid Thursday.
Seaborne announced Wednesday that it is moving the airline's corporate headquarters from St. Croix to Puerto Rico by March.
GERS Administrator Austin Nibbs said he received a letter from Seaborne Chief Executive Officer Gary Foss at 5 p.m. Thursday indicating that the money had been wired to GERS.
Nibbs said he would have to wait until today to verify that and that the amount Foss said was paid was $4,100,740.
GERS contends that an additional $186,998.60 in legal and financial advisor fees are also owed, and Seaborne has asked for additional documentation to support that claim, according to Nibbs.
According to a statement issued by Seaborne on Thursday, with the payment made, GERS is getting a 30 percent return on investment.
In December 2009, the GERS board loaned $3.3 million to the local airline, at an 8.25 percent interest rate for a five-year term.
In September 2012, the board modified the loan terms, dropping the interest rate to 6.23 percent and loaned the airline another $1.5 million to expand operations.
Nibbs said the last payment Seaborne made on the loan was in April. In May, negotiations began to restructure the loan yet again, he said.
No payments have been made since negotiations began, Nibbs said.
According to Seaborne's statement, the airline had been in talks with the GERS to restructure the loan "as part of broader discussions with the USVI government."
Those talks broke down last week, and a payoff amount was "promptly" requested, according to Seaborne.
Seaborne Airlines Director of Business Development Michael Ritzi did not return calls to The Daily News on Thursday to provide details about the nature of the broader discussions and whether the breakdown in the talks played a part in Seaborne's decision to relocate its headquarters.
Nibbs said he did not know anything about "broader discussions" with the V.I. government, and that talks about the loan restructuring broke down several weeks ago.
He said GERS was aware of the airline's desire to move to Puerto Rico and was trying to prevent that, but Seaborne simply could not meet the loan terms GERS required.
Originally, Seaborne was considering another $5 million loan from GERS, which would have been matched by one of Seaborne's investors, Luke Buse, Nibbs said. However, problems arose, including $1 million Seaborne owed to the V.I. Port Authority for landing fees, according to Nibbs.
A call to Government House for further explanation of the "broader discussions" between the airline and the government was not returned by press time.
The airline's move to Puerto Rico will result in the loss of 88 jobs on St. Croix. The jobs affected include administrative jobs, such as customer service and reservations staff, according to Ritzi.
On Wednesday, Ritzi said employees will be allowed to move to Puerto Rico if they choose and any new jobs created will be offered to Seaborne employees first.
The move will generate a total of 400 jobs in Puerto Rico, 150 of those in the next three months, according to Seaborne.
Puerto Rico Gov. Alejandro Garcia Padilla said the commonwealth provided $16 million in incentives to Seaborne, with the state Economic Development Bank becoming a minority shareholder in the company.
As part of the loan agreement with GERS, Nibbs had a seat on the board of Seaborne's parent company, Coastal International Airways.
Nibbs said Thursday he expects to resign his board seat now that the loan is paid off.
- Contact reporter Aldeth Lewin at 714-9111 or email firstname.lastname@example.org.