Sanitoa urges Fono to intervene in newest ASEDA bond issue
Pago Pago, AMERICAN SAMOA — Tualauta District #15 Representative-elect Larry Sanitoa is "not surprised" that the American Samoa TeleCommunications Authority (ASTCA) defaulted on their lease payment of $4.25 million to the American Samoa Government's Employees' Retirement Fund (ASGERF) which was due on Dec. 8, 2018.
This was noted in a Dec. 19, 2018 letter from Sanitoa to Senate President Gaoteote Palaie Tofau, a follow-up to a letter he wrote to Gaoteote on Dec. 3, 2018.
"This recent action by the ASGREF Board vindicates the wisdom of the Senate’s decision to disapprove the ASGERF’s request to double the local investment percentage from 17.5 to 35%. Needless to say, if the Fono had approved the request, the additional monies loaned to ASTCA would also be in default. If ASTCA fails to comply with the IRU, this investment will be the very first local investment made by the ASGERF to default," Sanitoa wrote in his Dec. 19 letter.
ASGERF board chairman Va’anatiu Tooafala wrote to ASTCA chairman Fai’ivae Alex Godinet, on Dec. 10, 2018, officially putting the Authority on notice of its default on the $17 Million IRU Asset Sale/ Leaseback agreement, which the two parties entered into on Dec. 8, 2017.
"It is my humble belief that the Senate and the House should investigate the decision making process the ASGERF pursued to approve the $17 million IRU," Sanitoa said to Gaoteote.
"The ASGERF board was provided with ASTCA’s FY2016 audited financial statement prior to signing the IRU agreement. ASTCA’s financial audit stated the opinion of 'going concern' which raised doubts about ASTCA’s ability to continue in the future. According to local financial experts, the 'going concern' qualification should be of great worry to lenders since it is a major indicator of the inability by a company to pay back its debts. Hence, the 'going concern' opinion should have been a huge 'red flag' to the ASGERF board."
Sanitoa claims that the "$17 Million IRU Asset Sale/ Leaseback Agreement sells the American Samoa branch of the Hawaiki Cable to the ASGERF at a tremendous discount. In total, it cost ASTCA $29.75 Million to obtain/ construct the American Samoa branch [spur] of the cable."
According to Sanitoa, the Fono should question and understand why ASTCA sold the Hawaiki cable to the ASGERF for only $17 Million or at a 43% discount. "As it stands now, and as the ASGERF chairman stated in their default notice, ASGERF can choose to sell the Hawaiki cable for $17 Miilion. The ASTCA management team needs to explain why such a deal was made."
Furthermore, "ASTCA’s request to defer the payments to ASGREF under the $17 Million IRU for two years, would be detrimental to the ASGREF."
Sanitoa referred to the FY2017 actuarial reports and said, "the ASGREF generated approximately $1.8 million of investment income (excluding unrealized capital gains). Earlier this year, it was reported that the Fund had to liquidate capital in order to meet its current benefit obligations, thereby further jeopardizing its ability to future benefit payments. If the $4.25 Million lease payment due December 8, 2018 is deferred, cash received from investment income would be negative, and the Fund would be forced to sell even more assets."
He urged Gaoteote, "For the sake of the Fund members, I sincerely hope the Fono will oppose any efforts by ASTCA to defer payments under the $17 Million IRU agreement."
Regarding the repayment of the proposed ASEDA bonds, Sanitoa said $11.8 million of revenue was identified to cover this new debt, $3 million of which is supposed to come from ASTCA’s broadband revenue.
"If ASTCA is unable to meet the annual $4.25 million lease obligation under the $17 Million IRU, how will they extract another $3 million to service the new bond — if the broadband revenue makes up over 25% of the pledged revenues?" he asked.
"This information should prompt Fono leaders to question the validity of the new bond offering. It is my humble belief that the Senate and House members are obligated to understand how ASTCA’s financial condition will affect the government’s ability to make bond payments. It should also be noted that ASTCA is already in violation of its Rural Utilities Service (RUS) loan covenants, because it has an outstanding loan from the ASGERF in the amount of $9.7 million according to recent reports. Obligating revenue to service the new bond further violates ASTCA’s loan covenant with the RUS," Sanitoa continued.
"The American Samoa Hawaiki cable branch is supposedly for the purpose of ensuring the territory has access to affordable internet bandwidth and new technology. Unfortunately, by moving forward with issuing the new bonds, it will result in the taxpayers of American Samoa having to subsidize any rate charged by ASTCA through the bond payments."
Sanitoa told Gaoteote that the arguments made by senators against increasing the local investment percentage "have now come to fruition. The Hawaiki cable is already here and there are still numerous unanswered questions. It would be an injustice to the people of American Samoa if the Fono leaders set aside their constitutionally mandated role of being the check and balance for the Executive Branch, and idly stand by as ASEDA issues new bonds without Fono oversight and appropriation."
He concluded, "Once again, I humbly implore you to intervene and have the Fono do its due diligence work on the new ASEDA bonds before they are issued."
As of press time, Samoa News was unable to confirm rumors that the bonds were to be issued today or that they were issued yesterday.