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Bank vows to help CPA meet bond indenture
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Posted on May 25 2008
The Bank of Guam has pledged to help the Commonwealth Ports Authority to meet the provisions of its bond indenture.
The bank, which serves as bond trustee for CPA, clarified that it had not issued a formal notice with respect to a technical default by the ports authority on its airport revenue bond.
BOG president and chair of the board Lou A. Leon Guerrero also called “a step in the right direction” the action plan recently implemented by the CPA management, following the governor’s takeover of the agency.
“The urgency of getting the plan formalized and implemented cannot be over-emphasized and I want you and other members to know that the Bank of Guam, as trustee, will work closely with CPA management to resolve this issue,”Leon Guerrero said.
On March 1, 1998, CPA entered into a $20 million airport revenue bond indenture agreement with Bank of Guam as the bond trustee. This agreement requires CPA to make timely payments and to maintain a 1.25 revenue-to-bond payment ratio at all times during the duration of the bond. In other words, for every $1 owed on the bond, CPA must have $1.25 of net revenue in reserve.
CPA, which still owes $17 million, has been making punctual payments. But it has failed to meet the required debt ratio of 1.25.
As bond trustee, the Bank of Guam could issue a notice of default and take over.
