News & Media
SXM Airport Clarifies the Issues of Closed Loop, Dividends and Concession Fees
SIMPSON BAY, St. Maarten (Tuesday, March 24, 2015) - The Princess Juliana International Airport, SXM, has presented a proposal that it considers a win-win-win situation for all concerned which, in particular, would pave the way for Government to charge some concession fee.
This proposal was disclosed in the presentation the Airport management made to members of the Committee on Tourism, Economic Affairs, Transport and Telecommunications of the Parliament of St. Maarten on Monday, March 23, 2015. The public meeting was carried live on radio and television. It would be the second time SXM Airport would meet with Members of Parliament in about a month to update them about developments at the Airport.
“It was again an honor for us to meet with the Parliamentarians and provide them with detailed answers to their various questions about developments at the Airport and we believe overall, our presentation was well-received,” said Regina LaBega, SXM Managing Director, who was accompanied by her management team at the presentation.
“In fact, we made a similar presentation to the Dutch Prime Minister Rutte and his delegation when he visited the island last July, the Governor, as well as Parliament in a previous meeting, and the response was very positive,” LaBega said, stressing that the Airport runs a very transparent operation and has no problems with giving information to the relevant authorities.
“Central to all our activities right now is the fact that we were able to secure a US$132 million loan on the international financial market at very favorable terms, all of which was made possible by the Moody’s Investors Service investment grade rating we obtained in 2012, following efforts by successive Governments since 2010 to obtain a sovereign rating, which was also granted simultaneously by Moody’s assigning the Government an even higher investment grade rating,” LaBega recalled.
In a press release issued by Moody’s at the time, it stressed what factored in the rating for SXM Airport were the favorable legal covenants and investor protections in the bond indenture. These include cash funded debt service reserve funds that cover three months debt service, and “a closed loop of funds that does not allow dividends to be paid to the holding company, retaining all excess cash flow for Airport purposes.”
“This is essential to understand why SXM Airport cannot pay dividends to Government,” LaBega explained. “It is a basic condition of the covenant we signed as part of the loan agreement and as such we cannot break it. That is why we have come up with an alternative proposal, which would offer Government a way to receive a concession fee without breaking the loan covenant.This proposal still has to be discussed with Government. We have requested a meeting with the Council of Ministers on this matter and are still awaiting a date for such meeting to take place,” LaBega said.
She stressed that unlike many airports in the region and even in the USA and Europe, SXM is not funded nor subsidized by government at all and has to rely completely on its own financial resources.
“It is in recognition of this that successive governments of St. Maarten decided to grant PJIAE NV a concession to operate the Airport without charging a concession fee while allowing the Airport to keep the so-called departure fees, which is not a tax, because only government can levy taxes,” LaBega continued.
LaBega recalled that part of the reason the bond issue to raise the US$132 million loan on the international financial market was quickly oversubscribed was the fact that investors were confident that Government would not be dipping its hands into the Airport’s finances for purposes that have nothing to do with the Airport.
“Investors are aware of the long-standing arms length policy of St. Maarten’s Government towards the government-owned companies. As a matter of fact, this was one of the issues raised by the Dutch delegation led by Prime Minister Rutte when we made the presentation to them last year,” LaBega said.
“We don’t need to go into the history of how that policy came into being and what has happened since, but our investors are definitely monitoring the pronouncements of our elected representatives with regards to the issue of dividends and concession fees and other related matters,” she added.
“We understand the position of Government, and we are not against paying concession fees; however, to just institute that now, in spite of the current concession agreement (which does not expire until 2030), would not instill confidence in our investors and could adversely affect not only SXM Airport, but Government and the whole economy of St. Maarten,” LaBega said.
“The closed loop is not something we came up with now; it is an integral part of our loan covenant. If we break that covenant, PJIAE would be in default and then we would need to ask the Government to come up with the US$132 million and then Government can do whatever it so desires with the Airport. It’s as simple as that. If you have a mortgage loan with a bank, and you later disagree with the basic terms of the loan, then you either have to pay up the bank or adhere to the agreed terms,” she explained, stressing, “this is why we are restricted in what we can do.”
“The airport is a strategic asset to the people of St. Maarten and I’m sure nobody wants to jeopardize its further development. As a growing regional hub, our hub partners too are closely watching what we are doing. More importantly, to continue to take SXM airport to the next level, of course, we need the cooperation of Government, particularly with the permits and authorizations that we are patiently awaiting to be granted.”