Home Argentina crisis Panel examines $ 60 million short-term loan for government VI

Panel examines $ 60 million short-term loan for government VI

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Government finance officials, from left to right, the Executive Director of the Public Finance Authority, Kirk Callwood Sr., the Director of the Office of Management and Budget, Jenifer O’Neal, and the Director of Administration and Finance Authority of Public Finance, Nathan Simmonds, testify at Monday’s financial hearing. (Photo by Barry Leerdam, USVI Legislative Assembly)

The Senate Finance Committee worked on the details of a potential $ 60 million loan deal with FirstBank Puerto Rico and Banco Popular de Puerto Rico to fund specific government operations and mitigate revenue losses caused by the new coronavirus.

Governor Albert Bryan Jr. requested the income anticipation note, which would be set at an interest rate of 5.5% to be repaid in 12 months.

Under the bill, the money would create working capital to help the government avoid employee layoffs, pay obligations and cover operating expenses for fiscal 2020.

Senator Kurt Vialet said the bill could be ready for a vote by Thursday, but at Monday’s hearing, senators told government finance officials they were not happy with the loan terms and urged them to push for “fair banking treatment”, something Vialet said the territory was unaware of.

Public Finance Authority director of administration and finance Nathan Simmonds said the two banks were asking for $ 2.5 million each to be set aside as a reserve for debt service. The banks also wanted the government to waive its right to sovereign immunity, under which the government would be immune from prosecution.

The chairman of the finance committee, Senator Kurt Vialet, is leading Monday's discussions.  (Photo by Barry Leerdam, USVI Legislative Assembly)
The chairman of the finance committee, Senator Kurt Vialet, is leading Monday’s discussions. (Photo by Barry Leerdam, USVI Legislative Assembly)

However, lawmakers have been informed by legislative legal counsel that there is no sovereign immunity which the government can waive, and that the stipulation is in violation of the revised organic laws; the government can already both sue and be sued.

Office of Management and Budget Director Jenifer O’Neal said that due to concerns raised by the Federal Emergency Management Agency and the US Treasury during banking negotiations, two items were also removed from the proposed transaction. The items removed were terms that pledged federal grant funds as a source of repayment and a pledge of general obligation from the Virgin Islands government. With these adjustments, O’Neal said she anticipates FEMA and the US Treasury will give final approval, as required by the existing community disaster loan agreement.

Vialet argued that the additional measure and the language used gave the impression that financial institutions did not trust the USVI government to pay its debts.

“They act like we don’t have any investment in their institution when we have millions of dollars in Banco Popular and FirstBank, but they come up with this draconian language as if the government of the Virgin Islands intends not to pay “, did he declare.

Pressed by Vialet, Public Finance Authority executive director Kirk Callwood Sr. and O’Neal said that as part of the working relationship between banking institutions and government, the government has never defaulted on a loan , made a late payment or not refunded the rent.

Part of the “safety package” that banks are asking for is a statutory lien that was set as a precedent in 2016 with regard to an increase in the gross revenue tax.

“Banks… have seen it as a very important feature of the security package they want,” said Roger Bagley, legal adviser to the Public Finance Authority.

But Vialet said it was like the banks needed all of these security measures because they believed the government wouldn’t settle all the payments.

“We have millions of dollars in these accounts. There has to be some leverage for us to have that money in their accounts. For them to act like we are an outside entity that is not well invested in them is really crazy… Maybe the pushback argument has to be, you are working with us or we are taking all our money from your bank, and we are putting it elsewhere that does not have these draconian measures, ”said Vialet.

Callwood said much of the additional security measures the banks put in place in the loan were tied to the government’s current rating of the market, as well as the current state of the market as a whole, which have both hit hard due to COVID-19[FEMININE[FEMININE

O’Neal said, conditions aside, the government will struggle to make its $ 20 million payroll every two weeks for the next few months without a loan.

O’Neal said the coffers only contain enough for the upcoming July 2 payroll and the government is working on the July 15 payroll. If taxes are collected on July 15, there will be enough for the last July pay. Beyond that, a loan will be necessary, she said.

The committee did not make a final decision on the loan at Monday’s hearing, but the committee plans to reconsider it this week.

All committee members – Sens. Vialet, Janelle Sarauw, Marvin Blyden, Oakland Benta, Allison DeGazon, Dwayne DeGraff and Donna Frett-Gregory – were present at the hearing.

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