KINGSTON, Jamaica – Minister of Finance and the Public Service, the Hon Audley Shaw, has said that negotiations for the sale of Air Jamaica are now at a stage where divestment seems imminent.
“It is now at a stage where I can indicate that a decision on the future (of Air Jamaica) is Imminent,” Mr. Shaw told the House of Representatives, Tuesday, as he responded to questions from the Opposition’s spokesman on finance, Dr. Omar Davies.
He added that the Government remained committed to the sale of the airline, as soon as a suitable arrangement can be made.
Mr. Shaw was speaking in the debate on his motion for approval of a revised Government Guarantee, in respect of a $1.8 billion loan arranged by NCB Capital Markets Limited for the cash-strapped airline. He said that the proceeds of the loan will be used to finance its business plan for fiscal 2009/10.
The figure was part of original loans amounting to $3.1 billion, from local and external sources, which the administration guaranteed in June for the airline. However, NCB Capital Markets Limited was unable to provide more than $1.3 billion for the first tranche, which should have been $1.76 billion. An agreement was reached, however, to add the outstanding amount to the second tranche of $1.34, which was approved Tuesday.
A Ministry Paper tabled in June by Mr. Shaw had explained that Air Jamaica’s new business plan was proposed to stabilize the airline and make it more attractive for divestment.
On Tuesday, Mr. Shaw also explained that the $1.8 billion was re-negotiated on terms that were more favourable than before.
“The original terms had the interest rate at 22.51 per cent. (Under) the new issuance, which is being done through NCB Capital Markets, the interest rate has been reduced from 22.51 per cent to 19.04 per cent,” he outlined.
In response to Dr. Davies, he explained that NCB Capital Market’s arrangements for the first tranche of the loan were affected by a liquidity “issue”, but they were, subsequently, able to negotiate a private placement.
“Fortuitously, that arrangement came in at 3.5 per cent cheaper than the original proposed placement. So, against this background, it was considered prudent to accept that offer,” he said.
He added that Air Jamaica has continued to show marked improvements in their operational efficiency and marked reduction in losses, and has been able to generate a modest operating profit since implementing the new business plan.
