A final agreement between Arctic Circle Air and the Commonwealth Development Authority is nearing completion to address the over $600,000 that was released initially as a pledge on the company’s interim loan that failed, according to the airline firm’s vice president, Paul Zak.
CDA released the $600,000 investment to the airline last year as a pledge on an interim loan that Arctic Circle Air was then negotiating with Rhode Island-based Independence Bank. In the end, the loan negotiations fell through and CDA now wants the $600,000 returned to the agency.
Saipan Tribune learned that the $600,000 investment came with the condition that it would be converted into equity once the bank loan deal is finalized.
According to Zak, the standing issue over this investment will soon be rectified after both parties agreed to convert the $600,000 into a note.
A note is a contract stating the terms of a loan, such as the principal, the interest rate, and the payment schedule. A note states also the rights and obligations of both the lender and the borrower and if one party does not fulfill obligations, the other may sue for redress.
“We’re converting their stock [$600K] into a note and which we are going to pay up in a monthly basis,” Zak said, adding that this is the only unpaid obligation thus far by Arctic Circle.
He assured that the amount will be paid up, including the accrued interest.
“CDA offered something on the table, we offered something…and we have this deal,” he said, adding that the “final document” is in process and would soon be signed by both parties.
Zak said that Arctic Circle, now with more shareholders, has the financial muscle and viability to ensure a stable operation. In fact, he said, the airline is currently negotiating to acquire a new aircraft, while two more pilots are undergoing training.
Arctic Circle Air welcomed a new investor last year through president Hee Cho of JMSH, LLC which owns Rota Resort & Country Club. The largest hotel property on Rota has chartered Arctic Circle Air for passenger services from Saipan.
Zak disclosed that Cho remains the majority shareholder, with investments of more than 51 percent.
Arctic Circle Air’s representation at the beginning of its venture is to provide a bridge between the Northern Marianas and Guam to promote agricultural exports. However, this changed later when the airline launched its passenger services and attracted new investors.
Zak, in an earlier interview, said the company is now in the transportation business, which involves both cargo and passengers. He emphasized that Arctic Circle Air will keep transporting general cargo and will continue to work with local farmers to export agricultural produce to Guam.