Shrimp farm gets
approval for $1.8
million state loanCeatech will have to guarantee the full amount
The state Board of Agriculture has approved a $1.8 million loan to struggling Kauai shrimp farmer Ceatech USA Inc. after reconciling the company's loan request with the more conservative recommendation of the staff of the Hawaii Agriculture Department.
Ceatech had sought $1.8 million, but only wanted to guarantee half the amount. The state Agriculture Department wanted to loan only $1 million and require a full guarantee.
The Agriculture Board's decision, approved unanimously yesterday at a public meeting in Honolulu, requires a guarantee for the full $1.8 million. Ceatech will initially get $900,000 and must reach certain milestones to get the additional $900,000. The company will be released from the guarantee when it can show performance and come up with appropriate collateral. All the money must be dispersed by June 2004.
Ceatech is seeking the state money to build as many as 20 more shrimp ponds on Kauai and must negotiate with the department on the details of the loan.
Ceatech farms shrimp in 40 ponds, and has lost $10.7 million since it started eight years ago. The company has said that by building more ponds it can become profitable, and the state agrees.
Up to now, Ceatech has been financed by its shareholders and a $3 million Bank of America loan.
To augment the state funds, Ceatech's principal investors have committed $2.5 million for working capital and capital improvements during the 15 months it will take until the new ponds are up and producing cash. Ceatech recently received $1 million from the sale of stock.
Ceatech had initially sought $4.5 million two years ago from the Ag Department after new loan money was created to boost Garden Island jobs, but a state loan administrator denied Ceatech's application as being too risky.
The Board of Agriculture ended up granting Ceatech a $2.5 million loan, but the commitment expired last year. The U.S. Department of Agriculture wouldn't issue a needed guarantee because of a collateral problem.
The state is giving Ceatech a seven-year loan, to be amortized over 15 years, which means a balloon payment will be due after seven years, said Kevin M. Yokoyama, acting loan division administrator.
Bank of America has valued Ceatech's Kauai farm at $5.7 million, the company said.