By Peter Richards
BRIDGETOWN, Barbados (CMC) — The Barbados and St. Vincent and the Grenadines government have agreed to sell their shares in the cash-strapped regional airline, LIAT, to accommodate a new reorganisational plan outlined by Antigua and Barbuda.
Antigua and Barbuda Prime Minister Gaston Browne, in an interview with the Caribbean Media Corporation (CMC) following Monday night’s shareholders meeting, also announced that an agreement had been reached to sell three of the aircraft that had been acquired with funds provided by the Barbados-based Caribbean Development Bank (CDB).
The other major shareholder government of the Antigua-based airline is Dominica.
“The real substance of the meeting is that we have agreed to sell the three planes that are owned by LIAT and charged to the Caribbean Development Bank, the loans which were actually guaranteed by the shareholder governments,” Browne told CMC.
He said the proceeds from the sale would be “utilised to repay or to reduce the outstanding debt.
“There was also a decision that St. Vincent and the Grenadines and Barbados will turn over their shares in LIAT to Antigua and Barbuda for one EC dollar each. In addition, Antigua and Barbuda will move immediately to appoint the administrator and the administrator will meet with creditors to include the staff to put a plan in place to repay them.
“This re-organisation obviously will include a significant haircut to all creditors including the staff and the outstanding severance, salaries and wages and in addition the government of Antigua and Barbuda will work along with the administrator to raise additional capital so that the new reorganised LIAT (1974) Limited would have the capacity to operate on a sustainable and profitable basis,” Browne told CMC.
Earlier, Dominica’s Prime Minister Roosevelt Skerrit said the proposal submitted by Browne to the meeting to prevent the liquidation of LIAT needed “to be further fine-tuned”.
“As I have indicated publicly and privately, we will provide support that the Prime Minister of Antigua and Barbuda is pursuing because if it works it can certainly ensure more access, more flights coming into our country because the Antigua-Dominica connection is critical,” Skerrit said.
“We wait and see. Once we have more details, obviously it is an initial proposal that was submitted that has to be further fine-tuned based on the discussions last night and then I could share some of the details of that subsequently to the Dominican public.
“But we shall wait and see, but just to say we will support the initiative once the refined documents come back to us, but we support him,” Skerrit told radio listeners in his homeland following the meeting.
According to the new reorganisational plan, a copy of which has been obtained by the CMC, Antigua and Barbuda is proposing re-investment of EC$108 million with St. John’s indicating that under the new plan it is prepared to underwrite up to 50% of the required capitalization.
“The new capital invested during reorganisation will be protected, in that it will rank in priority above all other creditors in the unlikely event of liquidation,” it said, noting that the remaining EC$54 million to be shared by other private and public sector entities, including existing shareholder governments.
However, the Antigua plan said if the existing shareholder governments are not interested in investing in the reorganised LIAT, they will be requested to surrender their shares for EC$1, which it claims is a superior offer to what they would get in liquidation.
“As far as practicable, the private sector should be encouraged to participate in the recapitalisation and directorship of LIAT. Private sector ownership and participation is desirable and would bring a greater focus on commercial operations of LIAT and profitability.”
The plan also notes that LIAT, after it returns to good financial health, is to offer jet services out of Miami on a wet lease of two jet aircraft, should necessary feasibility studies confirm that such services would be profitable.
The plan indicates that the jet service could also open up new markets that connect the Caribbean and Latin America to include Panama to facilitate inter-regional movement of people and goods.
The Companies Act of Antigua and Barbuda allows for the appointment of an administrator, who will be the sole representative of the LIAT estate. All decisions involving the affairs of LIAT would be taken exclusively by the administrator and not the directors, or shareholders.
The main responsibility of the administrator would be to reorganise the company, by cutting liabilities and realigning expenses to make. The administrator would have full powers to negotiate terms with creditors, including agreement to reduce sums payable.
Browne told CMC that the reorganised LIAT (I974) limited would be different from a restructured entity “where you restructuring to sustain debts but you have no deep cuts
“In a reorganised LIAT, creditors will be asked to take a cut up to 100% in some instances, but on average about 50%. The staff we expect, a 50% reduction in the staff liabilities because if they go to liquidation they will be lucky to get 10%.”
Browne said even though the plan is to sell the three planes owned by CDB, LIAT has seven other planes “on the ground here which are leased planes and we will get on to the lessors and enter into some new arrangement with them to continue to lease several of the planes so that LIAT could operate and we are hoping that LIAT could be back in the air within 60 to 90 days”.
Browne is predicting “significant staff cuts” insisting on a far leaner LIAT, one that will run exclusively on commercial terms and one that is expected to make a profit.
“Routes that are unprofitable, if their governments would like LIAT to operate those routes then they will have to pay some guarantee,” he added.