Turtle Farm increases government debt liabilty

| 17/03/2009

(CNS): The currentTurtle Farm loans are to be refinanced and, as a result, the government will be increasing its debt liability as it moves to guarantee an existing overdraft facility of US$5.5 million and a new financing package which consolidates and increases the farms existing debt portfolio to US$14.8 million. Although this only equates to around $2 million of new money for the farm, the government’s net debt ratio is impacted by around $6.5 million increasing it from 73.4% to 74.4% and taking it another step closer to the 80% limit.

Passed in the Legislative Assembly on Monday afternoon, Government Motion No 14/08-09 was brought by the Financial Secretary Kenneth Jefferson, who explained that the motion cancels all existing debt guarantees for the Farm and introduces two new ones. “Currently, the Cayman Turtle Farm (1983) Ltd is in negotiations with another local financial institution to refinance its local debt portfolio,” Jefferson told members of the House. “While no deal has been finalized, the  proposed refinancing is in the amount of US$14.8 million and its terms are such that it will allow the company to realize significant cash outflow reductions in the amount of cash spent on serving the local potion of its debt portfolio over the next several years.”

The government will also now guarantee an overdraft, which the Financial Secretary said was not new debt but an on going facility that the farm uses to deal with cash flow management, and the balance is constantly fluctuating. This, he explained, was not previously guaranteed by government as the bank in question was happy with a letter of comfort. However, he said that had changed and a government guarantee was now needed.

Jefferson said the impact on government’s contingent liabilities was 0.8%. “After factoring in these new debt guarantees the net debt ratio would be 74.4%, which is below the 80% ceiling specified in the Public Management and Finance Law,” he added.

The net debt ratio is the total amount of government’s own debt plus a risk-weighted proportion of statutory authorities and government companies’ debt that has been guaranteed by government, less the government’s cash balances or reserves.

Leader of Government Business Kurt Tibbetts called for a divsion on the motion, which received 13 ayes, including one from the only representative of the opposition, Captain Eugene Ebanks.

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