XCC(92)57
prices. This is because it may be necessary for the AA to set a PTC as high as $100 at the opening of the airport in a "low case" scenario. The AA will be free to set a PTC higher than $100 after the opening of the new airport and the Government will approve such a level of charges unless to do so would result in the breach of an international obligation binding upon the Government.
Dividend Payments
27
The payment of dividends to Government may be deferred to such an extent as the lenders of the project debt may require. Lenders are unlikely to agree to the payment of dividends if to do so would put at risk the ability of the AA to service its debt.
Completion and Debt Service Undertakings
28
Lenders to the AA are likely to seek an assurance from Government either to put in all sums necessary to complete the airport or to pay off the outstanding loans and interest at an agreed date at which the project would be deemed to be in default. This is because lenders will be asked to lend on the understanding that the revenues from the new airport will be used to service the debt. The lenders would, therefore, find it unacceptable to accept the risk of non-completion of the airport.
29. An unqualified completion guarantee from Government would create an unacceptably open-ended liability for the SAR Government and, in discussions with the PAA, the Government team sought to avoid the need for such an assurance. Instead, the agreement, as mentioned in paragraph 25 above, provides comfort for lenders in the event of non- completion beyond the targetted date for opening of the airport by providing the AA with the surplus from Kai Tak. Unless traffic were to fall well below that expected or it proved impossible to introduce a PTC of up to $100, this surplus will be adequate to enable the AA to meet almost all its debt service obligations. But the agreement recognises that in the event, that after the application of all equity, of the Kai Tak surplus and of all other resources available to it, the Authority were still unable to service its debt, the Government would fund the Authority to the extent of the shortfall in debt service ability until completion of the airport.
Executive Council