ASG moves to settle Hawaiki Cable debt with A.S. Retirement Fund
Pago Pago, AMERICAN SAMOA — Executive director of the American Samoa Employees' Retirement Fund (ASGERF) I'aulualo Faafetai Talia told Samoa News earlier this week that the Fund's board members have refused to accept an "Extinguishment Agreement" that calls for the termination of the Dec. 8, 2017 Point-to-Point Leaseback Agreement between the Retirement Fund and the American Samoa Telecommunications Authority (ASTCA).
According to a draft of the Extinguishment Agreement, dated Jan. 15, 2019, under the Indefeasible Right of Use (IRU), Hawaiki granted to ASTCA "an indefeasible right to use 200 gigabytes per second of capacity over the Hawaiki cable, a new state of the art submarine cable connecting Australia, New Zealand, and the mainland of the United States for 25 years."
In addition, ASTCA has "purchased a spur from Hawaiki which connects the Hawaiki Cable to American Samoa, and purchased and installed the necessary equipment in American Samoa (Landing Equipment) to bring the capacity to American Samoa." (Collectively, the IRU, Capacity, the Hawaiki Spur, and the Landing Equipment are referred to as the "AS Hawaiki System").
"In order for ASTCA to purchase the AS Hawaiki System, ASTCA had requested that ASGERF make an initial investment of $17 million which ASGERF has done under the December Agreement."
The Extinguishment Agreement notes that "The parties wish to extinguish and terminate the December Agreement upon payment of the amount of $18.7 million to ASGERF."
Furthermore, "ASGERF acknowledges that it has received total payments in the amount of $10,338,679.00 leaving a balance of $8,361,321.00.”
Under the Extinguishment Agreement, "ASTCA shall pay $18.7 million to ASGERF, which payment includes full payment of ASGERF's $17 million investment plus a fee of $1.7 million," and "ASTCA shall pay the remaining balance of $8,362,321.00 no later than March 31, 2019."
Upon full payment of that amount, "ASGERF shall execute and deliver to ASTCA" the Extinguishment Document.
Samoa News notes that while the draft copy of the Extinguishment Agreement we received is not signed, the only two names on the signatory lines are Gov. Lolo Matalasi Moliga and Attorney General Talauega Eleasalo V. Ale.
In a letter dated Dec. 24, 2018, the American Samoa Economic Development Authority (ASEDA) chairman Ueligitone P. Tonumaipe’a, who is also the ASG Treasurer, wrote to the governor regarding "Retirement Reimbursement and ASTCA - Hawaiki” which lists the amount awarded to ASTCA from ASEDA, including the funding sources.
The total amount awarded to ASTCA is $38,700,275 and the funding sources for the partnership are as follows:
DESCRIPTION AMOUNT FUNDING SOURCE
- 2nd payment $15,000,275 2018 series
- Reimburse ERF $10,338,679 2018 series
- CIP $6,661,321 OIA CIP
- Interest @ 10% $1,700,000 OIA CIP
Capital Projects $3,000,000 2018 series
Tonumaipe'a noted that with the "pending approval" of the OIA funding sources, “we [ASEDA] respectfully defer to approvals."
However, he said, “per direction and discussions, the following is proposed: As a follow up to the discussion held to final the transition of the Hawaiki cable project, we extend our gratitude to the retirement board for stepping in to assist the telecommunication projects,” the ASEDA chair wrote, adding that "as confirmed, ASEDA will provide the initial payment and disbursement of $5,000,000 to the ASGERF as we continue to the final negotiations."
"Our partnership will be memorialized in a Memorandum of Agreement to ensure the investments are properly accounted and documented," Tonumaipe'a continued. He said Lolo's approval will ensure the initial payment and implementation asset acquisition transaction.
The letter was approved by the governor, who signed it.
In response to Samoa News inquiries, ASGERF executive director I'aulualo said the Retirement Fund Board does not agree with the Extinguishment Agreement and therefore, the terms are not accepted. He said the Point-to-Point Leaseback Agreement is still being honored, and in effect.
Last month, ASGERF board chairman Vaanatiu Toafala Iafeta said that in order for ASTCA and the ASG to "fully own" the American Samoa branching unit of Hawaiki Cable, they must cough up $78.1 million for the Retirement Fund.
According to Vaanatiu, under the December 2017 Agreement between ASTCA and the ASGERF, the Fund is "leasing" the cable to the semi-autonomous agency.
The payment breakdown for the Fund's $17-million-dollar investment is as follows: For the first four years (2017-2020) the payment amounts are 25% of $17 million ($4.25 million each year); for the 21 remaining years (2021-2041) the payments are 20% of $17 million ($3.4 million each year).
The total amounts to $88.4 million. And since ASTCA has already made two payments, totaling $10.3 million, the amount needed in order for them to fully own the American Samoa branching unit of Hawaiki cable is $78.1 million.
"That's how much it's going to cost them to buy the Fund out of the IRU," Vaanatiu said last month. "Right now, it is 100% owned by the Retirement Fund," he continued.
Vaanatiu said this is based on the agreement, which he says is a "legal" contract that is yet to be amended.
See Monday, Feb. 11th, Samoa News for details on the Memorandum of Agreement (MOA) between ASG, ASEDA, and ASTCA, which outlines the monies ASEDA and ASG have disbursed to ASTCA and ASTCA’s contribution towards the debt service of the 2018 Bonds.