LIAT’s major shareholders have reached an agreement, which Antigua and Barbuda’s Prime Minister Gaston Browne said could see the airline flying again “in 60 to 90 days.”
The shareholder, which also includes the governments of Barbados, St. Vincent and the Grenadines and Dominica, met virtually late on Monday for Browne to present a plan to reorganize the cash-strapped LIAT.
“I think that our colleagues understand that there’s significant merit in the proposed reorganization plan and we were able to come to a consensus,” Browne announced Tuesday morning.
“The meeting went very well, the tone of the meeting was very respectful, the interventions were heard and we came to the consensus that we should sell the three planes that are owned by LIAT and charged to the Caribbean Development Bank (CDB).
“What that will do, that will help to literally eliminate the debt from LIAT’s books for those planes, and, in addition, the proceeds will be utilized to pay down the loan, even though there would be a residual value. The governments will continue to make payment on the residual value after the proceeds of the planes are applied to the loans at the Caribbean Development Bank,” Browne explained.
The Antiguan leader said there are a number of LIAT-related loans with the CDB.
“There’s a re-fleeting loan and you also would have had a number of additional loans that were extended to the governments in order to support LIAT over the years. So, if you were to aggregate all of them, after the aircraft would have been sold and the proceeds applied, I believe there will be a shortfall of about US$45 million, which will be shared proportionally by the shareholder governments and obviously we will have to service those loans until they are retired.
Company is not out of the woods yet. Administer to be appointed
Browne noted that the CDB is a preferred creditor, so the governments cannot allow the loans to go into default, But in essence LIAT would be able to rid it’s books of those debts and give Antigua and Barbuda the opportunity to speak to other creditors to try and reorganize LIAT and make the institution viable.
Antigua and Barbuda will be submitting three names for the position of administrator — among them Wilbur Harrigan of PKF Chartered Accountants and Business Advisers, and Cleveland Seaforth of BDO.
“Antigua and Barbuda will be moving almost immediately to appoint the administrator and the administrator on the other hand will have to present the plan to the court within a matter of weeks for the reorganization of LIAT. If the administrator fails to get the haircut from the various creditors, then LIAT will still be faced with liquidation, so the company is not out of the woods as yet,” Browne explained.
“Having done that plan, we will negotiate with creditors to bring down the debt or to bring liabilities and assets to some form of balance and at the same time to come up with an operational plan, which will see a very lean LIAT, especially during this period of COVID.”
Transfer of shares to Antigua and Barbuda
Prime Minister Browne said his colleague prime ministers must be congratulated for this very important step towards saving the LIAT brand.
“One of the interesting things coming out of the meeting is that both Barbados and St. Vincent and the Grenadines, they have agreed to transfer their shares to Antigua and Barbuda for the grand sum of $1 each; and the aggregate shares that would be transferred to Antigua and Barbuda would be around 60 per cent between the two governments. So I think that’s a responsible proposition,” he said.
“I also want to make the point that our challenges, they have just begun in the sense that raising the capital and keeping LIAT alive will be far more challenging than the little battle that we had there to get St. Vincent and the Grenadines and Barbados to surrender the shares so that we could move forward.
“No one should really gloat about this. In fact, I would say if anything that both Prime Ministers [Mia Mottley and Dr. Ralph Gonslaves] should be complimented for the fact that they have seen the need to cooperate with Antigua and Barbuda recognizing how important LIAT is to Antigua and Barbuda and the wider Caribbean.
“But in essence our challenges have just started but we are not daunted by challenges and we feel confident that we will be able to raise the necessary capital so that we can put LIAT back into the air to have it flying and to restore LIAT to profitability and sustainability and we will be using every effort in order to ensure that those objectives are achieved.
What will happen to the employees?
Browne said St. John’s wants to ensure that people go back to work as soon as possible.
He is also maintaining a position of 50 per cent cut on severance payments.
“It’s the only way that it would work [that is] by significantly reducing the severance payments and also by slashing the amounts due to other creditors,” he said.
Article was first published on Caribbean News Service