Fiji Airways guarantee extension to give comfort to lenders

Fiji’s Attorney General and Minister for Economy Aiyaz Sayed-Khaiyum today presented a motion seeking an extension of the FJ$455 million government guarantee facilities offered to Fiji Airways last year.

The motion, presented in parliament this morning seeks to amend a parliamentary approval granted on 25 May 2020, by extending the initial term from three years to “until the guarantee facilities are discharged by the lender or fully settled” and that, unlike the previous approval, require Fiji Airways to pay a one-off fee of 15 per cent on the government guarantee which equates to around $68 million.

“The rationale for of course the extension of the guarantee is because we know that, Fiji Airways, did not want to have what we call a cliff situation where all the loans become payable at one point in time,” Sayed-Khaiyum said.

“That would obviously put a huge cash flow pressure on Fiji Airways. Fiji Airways has now sought an extension of the time over which these loans can be paid and the period has in fact been extended, where now the loans are actually stretching up to 15 years. Some will mature in seven years time with a range from seven to 15 years. So, essentially, in order for these financiers to have that level of comfort, they need the government guarantee to cover that particular period, and we of course are glad to do that because this is our national carrier.”

Sayed-Khaiyum also said that in the event that Fiji Airways does not pay back the loan to FNPF or if the Fijian Government does not come up with a guarantee sum, then FNPF can acquire up to 51% of the Fijian Government shares.

“Government had some time back when Fiji airways had borrowed from FNPF, had also mortgaged or allowed the mortgage of 25% of its shares to FNPF, so we have now said to FNPF, to give them that level of security, that in the event which we don’t believe will happen, that Fiji Airways does not pay the loan to FNPF, or the Fijian government does not come up with a guarantee sum then FNPF has the ability to take worth of the 51% shares that the Fijian Government holds.

“The good thing about this of course is that in that non-eventuality, the shares will still remain so. Given these, we are asking parliament to extend the guarantee facilities until the loans are discharged and to have a one-off payment for this particular service.”

Debate on the motion continues in parliament.

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