Government to guarantee Steam Packet loan

By IoM Today Reporter   |   Reporter   |
Thursday 10th October 2019 10:00 am
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Isle of Man Steam Packet Company fast craft Manannan, known as the Seacat

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The government will be required to guarantee the Steam Packet’s loans when it builds its new ships.

Under the terms of the sea services agreement, the company must provide two new ships, with the first due to be in service in 2022.

In a Treasury report, due to be presented to Tynwald on the refinancing of the £76m the company owes the taxpayer, it is also revealed that a government guarantee on the loans for new boats will be required.

The section of the report titled ’Additional Company Debt’ details the necessity for new ships and that ’it will require borrowing’.

The report added: ’It is clear from discussions to date with banks and other financial institutions that for the cost of the finance to be competitive a government guarantee will be required.

’The attraction for financial institutions is that it is a stable company with long term revenue projections backed by government.

’And estimate is that without a government guarantee the interest rate currently required would be in excess of 5%.’

This comes as Tynwald members are being asked to back a recommendation from the Treasury to refinance the company’s debt.

The taxpayer bought the company’s debt as part of last year’s £124.3m purchase of the Steam Packet with the intention to run it as an arm’s-length operation.

As part of that deal, the Treasury lent the company £76m to pay off its external lenders with a refinancing deal to be agreed between the Treasury and the Steam Packet’s board to return the money to the taxpayer.

The options considered by the Treasury include the loan remaining with the Steam Packet, converting it to equity, a retail bond and a public bond. Treasury Minister Alfred Cannan MHK is recommending an externally-financed solution.

This means that the loan will be refinanced by the Steam Packet taking out a new loan with a private institution allowing it to pay back the Treasury and handle its own finances.

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