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HomeNewsArchivesWAPA Refinancing to Improve Authority’s ‘Liquidity,’ Director Says

WAPA Refinancing to Improve Authority’s ‘Liquidity,’ Director Says

The V.I. Water and Power Authority’s board approved a financing package Wednesday that will not bring in any new cash, but will save the utility $1.3 million in interest, as well as open up two lines of credit that can be used for vendor payments.

The board met in an emergency meeting on St. Thomas, so officials could get quick approval for the transaction, which includes refunding $17.5 million – or what the authority has outstanding – on its 1998 series bonds. The refunding would allow WAPA to capitalize on lower market rates, according to WAPA’s Executive Director Hugo Hodge Jr.

“Because market conditions change, we have to get to the market when it’s an opportune time,” Hodge said. “Now we can go in and get some lower rates and open up some lines of credit, getting our liquidity in a better position than where it is right now.”

Proceeds from the refunding will be put toward repaying the authority’s maxed out lines of credit with First Bank and Banco Popular, which amounts to $20 million. Having that money available would allow WAPA to pay its vendors, particularly Hovensa, while waiting for customer payments to come in.

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“By having these lines available to us, we can manage when we pay Hovensa and not fall in arrears, and pay down the lines upon [receipt of] money from ratepayers,” said WAPA’s Chief Financial Officer Joseph Boschulte. The authority currently owes Hovensa $30 million, while the V.I. government owes WAPA approximately $32-$33 million.

During the meeting, one board member expressed concern that the “lion’s share” of the money would go toward paying the authority’s debt to Hovensa.

“The theory that the lines of credit are being used to tide us over is only good for so long,” said board member Gerald Groner. While Groner said that WAPA could be back in the same position after six months or so, Hodge said he does not anticipate going back to the bond market for anything other than money for capital projects.

“These working capital lines, to have access to them, is clearly a financial tool for us to manage our cash flow situation,” Boschulte added. “It is not the intent of WAPA right now to draw down as soon as we receive it to pay Hovensa. We plan to collect the government receivables and to pay down a large portion of what we owe.”

Officials also received authority from the board to refinance a portion of its $40 million term loan, which was taken out a few years ago with First Bank to pay for fuel. The loan was spread over a period of three years, leaving WAPA with a $17 million “balloon payment” at the end, but Boschulte said that re-financing right now would allow the authority to take advantage of lower interest rates and save $1.3 million.

Instead of spreading the $17 million over three years, WAPA would be paying it off over 5.8 years, officials said.

“We are saving on interest rates and improving on liquidity,” Hodge said later.

Attending the emergency meeting by video and teleconference were board members Juanita Young, Groner, Noel Loftus, Wayne Biggs, Cheryl Boynes-Jackson, and Brenda Benjamin.

Board members Alicia Barnes, Karl Knight, and Donald Francois were excused.

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The V.I. Water and Power Authority’s board approved a financing package Wednesday that will not bring in any new cash, but will save the utility $1.3 million in interest, as well as open up two lines of credit that can be used for vendor payments.

The board met in an emergency meeting on St. Thomas, so officials could get quick approval for the transaction, which includes refunding $17.5 million – or what the authority has outstanding – on its 1998 series bonds. The refunding would allow WAPA to capitalize on lower market rates, according to WAPA’s Executive Director Hugo Hodge Jr.

“Because market conditions change, we have to get to the market when it’s an opportune time,” Hodge said. “Now we can go in and get some lower rates and open up some lines of credit, getting our liquidity in a better position than where it is right now.”

Proceeds from the refunding will be put toward repaying the authority’s maxed out lines of credit with First Bank and Banco Popular, which amounts to $20 million. Having that money available would allow WAPA to pay its vendors, particularly Hovensa, while waiting for customer payments to come in.

“By having these lines available to us, we can manage when we pay Hovensa and not fall in arrears, and pay down the lines upon [receipt of] money from ratepayers,” said WAPA’s Chief Financial Officer Joseph Boschulte. The authority currently owes Hovensa $30 million, while the V.I. government owes WAPA approximately $32-$33 million.

During the meeting, one board member expressed concern that the “lion’s share” of the money would go toward paying the authority’s debt to Hovensa.

“The theory that the lines of credit are being used to tide us over is only good for so long,” said board member Gerald Groner. While Groner said that WAPA could be back in the same position after six months or so, Hodge said he does not anticipate going back to the bond market for anything other than money for capital projects.

“These working capital lines, to have access to them, is clearly a financial tool for us to manage our cash flow situation,” Boschulte added. “It is not the intent of WAPA right now to draw down as soon as we receive it to pay Hovensa. We plan to collect the government receivables and to pay down a large portion of what we owe.”

Officials also received authority from the board to refinance a portion of its $40 million term loan, which was taken out a few years ago with First Bank to pay for fuel. The loan was spread over a period of three years, leaving WAPA with a $17 million “balloon payment” at the end, but Boschulte said that re-financing right now would allow the authority to take advantage of lower interest rates and save $1.3 million.

Instead of spreading the $17 million over three years, WAPA would be paying it off over 5.8 years, officials said.

“We are saving on interest rates and improving on liquidity,” Hodge said later.

Attending the emergency meeting by video and teleconference were board members Juanita Young, Groner, Noel Loftus, Wayne Biggs, Cheryl Boynes-Jackson, and Brenda Benjamin.

Board members Alicia Barnes, Karl Knight, and Donald Francois were excused.