Blue Islands Limited: Provision of a secured loan

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A decision made on 30 June 2020

Decision Reference: MD-TR-2020-0081xx
Decision Summary Title:	Blue Islands Limited – Provision of a secured loan		Date of Decision Summary:	25th June 2020
Decision Summary Author:	Director of Treasury and Investment Management		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Blue Islands Limited – Provision of a secured loan		Date of Written Report:	25th June 2020
Written Report Author:	Director of Treasury and Investment Management		Written Report: Public or Exempt?	Exempt Articles 26, 33 & 34
Subject: Provision of a secured loan in the maximum sum of £10,000,000 (excluding capitalised interest) repayable no later than 30th June 2026.
Decision(s): The Minister for Treasury and Resources decided to: Approve the provision of a secured loan of up to £10,000,000 to BI until 31 December 2026; Authorise the Treasurer of the States to sign the final loan agreement, ~~and~~ any other accompanying documentation and all drawdowns against utilisation requests; Complete the process to appoint a Non-Executive Director to the Board of Blue Islands; Approve the capitalisation of interest payable on the loan in accordance with the terms of the Loan Agreement; and Provide funding from the General Reserve to the Treasury & Exchequer head of expenditure of £200,000 representing estimated costs in 2020
Reason(s) for Decision: Lending The Coronavirus pandemic is having a significant social and financial impact on the lives of Islanders and presents a significant level of challenge for Jersey’s economy. During this unprecedented period of uncertainty for the Island, it is vital that the Minister for Treasury and Resources can make available sufficient funds to support Islanders and businesses on a timely basis. In signing MD-TR-2020-0029 the Minister has declared an immediate threat to the health or safety of any of the inhabitants of Jersey and to the stability of the economy in Jersey and is satisfied that those circumstances require the application of the modifications set out in Article 24(9) of the Public Finances (Jersey) Law 2019, as amended by Public Finances (Amendment of Law) (Jersey) Regulations 2020 (“Public Finances Law”). Consequently, the Public Finances Law applies with those modifications. Under the modifications the limit on loans that the Minister may make in a financial year is increased from £3 million to £100 million, and the limit on total outstanding loans made by the Minister is increased from £20 million to £100 million. This loan is being agreed under the Minister’s draft policy, as amended from time to time, to act as lender of last resort where in the Minister’s opinion there is clear and unambiguous public interest in furthering the continuity of a business which is, in the Minister’s opinion critical to the economic recovery following the restrictions placed on islanders as a result of the COVID 19 pandemic. . This policy will be finalised in the coming days. Capitalisation of interest and potentially the final drawings from the loan will occur after the Minister’s modified powers under the Public Finances (Amendment of Law) (Jersey) Regulations 2020 have ended. This is therefore approved under and limited by the Minister’s existing powers under Article 27 (3) of the Public Finances (Jersey) Law 2019: 27 Loans (1) The Minister may, in the name of the States, lend money from the Consolidated Fund. (2) The total amount of all loans under paragraph (1) that may be made during a financial year must not exceed £3 million, to be calculated without reference to any interest or premium that may be charged with respect to the loans. (3) The total outstanding amount of all loans under paragraph (1) at any given time must not exceed £20 million, to be calculated without reference to any interest or premium that may be charged with respect to the loans. The draft Business Case was presented to the Council of Ministers on 10th June who have provided their support to the proposal. Expenditure Article 15(3) of the Public Finances (Jersey) Law 2019 states that the approval by the States of a government plan authorises the Minister to direct how an approved appropriation for a reserve head of expenditure in the plan may be spent (including on another head of expenditure) in the first financial year covered by the plan. The current Contingency Allocation Policy (published as R.23/2020) sets the requirement for all allocations from contingency to be considered by the Investment Appraisal Board, Principal Accountable Officer and States Treasurer prior to submission to the Minister for approval, however it also states that ‘Where a request is made for £100,000 or less, or where the Minister is satisfied that there is an urgent need to provide funding in the public interest, an allocation may be made by the Minister on the recommendation of the Treasurer.’ In this instance the Minister is satisfied that there is an urgent need for funding and given the amount being allocated to the Treasury & Exchequer budget additional approval was sought from the Principal Accountable Officer. ~~The Business Case was presented to the Council of Ministers on 10~~th ~~June who have provided their support to the proposal.~~
Resource Implications: To date, the resources of Treasury and Exchequer have been utilised in assessing this proposal. The provision of the loan requires no significant additional manpower to implement and the provision and monitoring of loans forms part of the day-to-day activity of the Treasury & Investment Management team. The loan will be provided from the Consolidated Fund and from 2023 will provide a fixed rate of return to the Consolidated Fund which is expected to be in excess of the current investment return on the cash held and there is sufficient surplus cash available to make the loan over the timeframe proposed. The General Reserve head of expenditure will reduce by up to £200,000 in 2020 and the Treasury and Exchequer head of expenditure will increase by an identical amount. ~~The Business Case~~ ~~was produced~~ ~~by the Strategic Finance and Investment Management teams, reviewed by the Treasurer and is supported by the Council of Ministers.~~
Action required: Head of Financial Governance to inform the Director of Treasury and Investment Management that this decision has been signed. The Treasurer of the States to sign the Loan Agreement and accompanying documents ~~and~~ ~~the~~ ~~appointment of~~ ~~a Non-Executive Director to the Board of Blue Islands~~ ~~is to be completed~~.
Signature:		Position: Deputy S J Pinel, Minister for Treasury and Resources
Date Signed:		Date of Decision: