Brighton & Hove Council is to restructure a multi-million pound loan to the operators of the BAi360 tourist attraction after agreeing to defer receipt of a repayment due to falling visitor numbers.
The council’s policy, resources and growth committee this week agreed to defer up to £1.34m of the £1.49m payment due from the operators – after agreeing similar deferments twice last year.
The council, which is repaying almost £1m every six months to the Public Works Loan Board on the debt it took out to finance construction of the viewing tower, is set to return with options for a restructuring of repayments from BAi360.
A report by Max Woodford, executive director, economy, environment & culture at the council said: “The council has instigated work to consider restructuring the loan in the long term to protect the council’s position and maximise the returns on the loan payment.”
Consultancy Avison Young has completed work on financial modelling, but the committee was told that the council needs a better understanding of the operators’ plans to turn performance around.
2nd Housing & Regeneration Finance Summit
County Hall,
October 31st, 2019
The attraction has recently increased spending on marketing to £500,000 and plans operational efficiency savings, according to a new business plan.
The deferment of the June 2019 six-monthly payment is the third in a row agreed by the committee.
Last year, it agreed to defer £0.570 million of the £1.492 million due in June 2018. However, a £0.922 million payment made by the BAi360 enabled the council to pay the PWLB the amount it owed that month.
Then, in December 2018 PR&G Committee agreed to defer £0.880 million of the £1.492 million total payment due at the end of that month.
The deferments were deemed necessary because visitor numbers had fallen below projections.
The original loan to the i360 included the principle, rolled up interest during construction, and arrangement fees totalling £36.222m.
The loan was planned to be repaid on an annuity basis until the 30 June 2041 including a market interest resulting in six monthly payments of £1.492million, including capital repayment and interest.
Woodford’s report said: “The proposed payment shortfall of £1.342 million in June 2019 coupled with the deferred payments in 2018 have a cashflow impact on the council reducing the council’s investment income.”
He said that interest will be charged on deferred payments in line with the loan agreement to offset this loss and this interest will be included in any proposed debt restructuring.
The report said that the viability of the i360 has a number of other financial implications for the council, including on a 49% share of the business rates from the attraction and benefits from increased parking revenue from a nearby car park.
In 2014, a statement on the Facebook page of the BAi360 voiced confidence in the ability to back the loan.
It said: “The council and its partners, the Coast to Capital Local Enterprise Partnership (LEP) have scrutinised the financial projections in great detail.
“This is a safe investment for Brighton & Hove City Council to make.”
In addition, it said that the attraction was projected to attract far more visitors than it needs to meet its loan repayments.
“It could continue to repay its loan even if visitor numbers turn out to be just half of those expected,” the statement continued.
It added that “careful oversight” of the project has been undertaken by business people from the LEP.
Avison Young is set to return with proposals for the loan restructure by the autumn, Woodford said.
