Published November 14, 2002
BY JEFFREY BLACKWELL
The company seeking to launch a high-speed ferry service between Rochester and Toronto revealed Wednesday that the company’s president and its financial adviser are the primary investors in the project.
Canadian American Transportation Systems disclosed the information in an effort to end speculation about the project’s finances and break the stalemate in negotiations on a $14 million state aid package.
CATS President Dominick DeLucia and Brian Prince, its financial adviser, are pledging the bulk of the private cash needed to cement a $57.7 million deal that includes international banks and companies along with the governments of Australia, New York state and the city of Rochester.
Release of this information was one of four demands issued Monday by the Rochester Genesee Regional Transit Authority to unlock an agreement that would pass the loan part of the aid package ($6.6 million) from the state.
DeLucia and Prince said they are spending $5.6 million above the $1.7 million CATS has already spent on the project. They said they are ready to provide evidence to the RGRTA that they have the money if authority officials pledge to sign the version of a loan agreement approved by CATS and the state.
“The issue is how can we get this done so we can celebrate this and move it forward,” Prince said. “That’s what we are trying to get to.”
Negotiations between CATS and the RGRTA exploded Monday with the release of an ultimatum by the Transit Authority that required CATS to agree to four demands to close the loan. Along with releasing the financial information, the RGRTA also demanded:
· That RGRTA be released from any financial exposure from the ferry operation.
· That RGRTA be released from helping CATS obtain docking permits and rights.
· A pledge that CATS would operate and dock the ferry from the Port of Rochester.
RGRTA Chairman William Nojay said that releasing the information would not be enough to close the deal. He said that CATS would have to meet all four conditions before the Transit Authority would sign the loan agreement.
“The RGRTA has made clear the conditions under which it will loan public funds to this project,” he said. “With regard to the disclosure of the equity investors, we are standing by to see a bank account statement with $9 million or signed, unconditional commitment letters for the funds.”
DeLucia and Prince said they have met three of the conditions. Together they are investing $2.1 million in cash into the business above what they have already spent. In addition they have agreed to place a total of $3.5 million over three years into a reserve account from the cash flow of the business once it starts. Separately, the company is also providing a $3 million personal guarantee on the loan for ship construction that the partners of CATS will have to pay if the company defaults.
DeLucia said they have documents verifying their investments.
They provided a letter to the Democrat and Chronicle from ABN Amro Bank – the Dutch bank providing the bulk of the loan for the construction of the ferry – verifying the sources of funding for the project. The letter was sent to the state along with letters from DeLucia’s and Prince’s banks and accountants.
“We have satisfied our financial burden of proof with the governor’s office and with the State Infrastructure Bank,” DeLucia said.
CATS has pledged to operate the boat in Rochester as long as it’s commercially feasible and to take all responsibility for obtaining docking permits.
RGRTA officials said they are trying to protect the public money and the financial well-being of the RGRTA.
“There will be two signatures on that document: Dominick DeLucia’s and mine,” said Donald Riley, chief executive officer of RGRTA.
“And I won’t sign until I feel the public dollars are protected and that our operation here is protected.”
But CATS officials said the dispute is coming down to one condition – clearing the RGRTA of any liability or financial exposure.
DeLucia and Prince said the dispute is not about protecting the state money or local taxpayers. The RGRTA would not be responsible to pay back the state loan if CATS defaults, DeLucia argues.
DeLucia said the RGRTA wants to hinder the project without fear of financial repercussions.
DeLucia said RGRTA really wants waivers prohibiting CATS from seeking monetary damages if the RGRTA commits negligence and willful misconduct or impedes CATS’ ability to set up business.
But Nojay said he is not trying to kill the project. “RGRTA’s only interest is protecting public funds,” he said.
Signing the loan agreement would allow the transfer of not only the $6.6 million loan, but also the $7.4 million in grants to CATS. It would also allow the city to move forward on improvements to the Port of Rochester.
Mayor William A. Johnson Jr. and CATS officials are calling on Gov. George Pataki to lean on the RGRTA to break the conflict. Joseph Conway, a spokesman for Pataki, said the administration is working on a resolution.
“We’ve been working hard day in and day out to get all the interested parties on the same page, and we will continue to do so,” he said. “We are still confident that all the details can be worked out.”
Preparation of the Port of Rochester to accommodate the ferry is the most critical problem at this point.
It does not appear that the work can be finished by next August, the target launch date of the service.
However, work continues in Henderson, Australia, on the $42.5 million ferry, according to Austal Ltd. spokeswoman Claire Stannaid.
But, she said, the next phases of the construction could be delayed, which could push back the date of delivery. The company is waiting for a $5 million payment from CATS.
“It depends on when the funds come through,” Stannaid said.
“We’ve been following the political proceedings there very closely.”
E-mail address: jblackwell@DemocratandChronicle.com
Funding for the fast ferry
Canadian American Transportation Systems (CATS) lists the following uses and sources of funding for the ferry service from Rochester to Toronto.
Reserves and pre-launch $15,200,000
Vessel cost $42,500,000
Total uses $57,700,000
Asset-based financing (to be repaid by CATS)
Australian Export Finance & Insurance Corp. (EFIC) $22,500,000
ABN Amro bank (unsecured by EFIC) $4,200,000
Daimler/Chrysler (builder of the ship’s engine) $6,300,000
Subtotal asset-based funding $33,000,000
Public sector financing
CATS New York state grant $7,400,000
CATS State Infrastructure Bank loan $6,600,000
CATS City of Rochester loan $1,300,000
Subtotal of subordinated financing $15,300,000
CATS and equity partners (paid to date) $1,700,000
CATS and equity partners * $5,600,000
Austal Ships (builder of the ship) $2,100,000
Sub-total Equity $9,400,000
Total sources $57,700,000