The new owner of Arctic Circle Air has initially agreed to repay the $600,000 loan the airline company had borrowed from the Commonwealth Development Authority.
CDA director Manuel Sablan told Saipan Tribune yesterday that a repayment agreement is in the works between the agency and Arctic Circle, the cargo airline established by the late Anthony Pellegrino.
“The loan agreement is being finalized by both attorneys [of the parties] after the new owner agreed to the terms and conditions,” Sablan said, adding that the work is nearing completion.
According to Sablan, the soon-to-be finalized deal will stipulate repayment terms of six months to a year until all obligations are settled with the authority. Included in the “default payment” is a 7-percent per annum interest, he added.
CDA released the $600,000 to Arctic Circle in 2012 to be used supposedly as a pledge on the company’s interim loan with the Rhode Island-based Independence Bank.
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. However, that loan transaction never materialized. CDA now wants the $600,000 back.
In an earlier interview with Arctic Circle vice president Paul Zak, he said the $600,000 was converted into a note, which is a contract stating the terms of a loan, such as the principal, the interest rate, and the payment schedule. This note was to be satisfied through monthly payments including accrued interest.
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.
Cho is the majority shareholder, with investments of more than 51 percent in the airline company.
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 disclosed that the company is now in the transportation business, which involves both cargo and passengers.
Meantime, CDA director Sablan said that the agency is awaiting a court decision pertaining to the bankruptcy case filed by Freedom Air, which owes CDA $900,000, released as a loan in March 2012.