With a potential buyer in the Philippines, Borough floats ferry deal

by:  Ellen Lockyer – KSKA, Anchorage

The Matanuska Susitna Borough’s  ailing ferry MV Susitna is poised for sale to the Philippine Red Cross.  KSKA’s  Ellen Lockyer reports.

The Matanuska Susitna Assembly untied the giant albatross from it’s collective neck Tuesday night, with a vote to accept more than  a million and a half dollars for the

MV Susitna. The unused ferry has cost the Mat Su Borough about two million dollars in storage fees since it’s construction was completed in 2012.

The ferry also needs one million dollars in engine repairs, since rainwater leaked into it’s stacks and ruined three out of four engines earlier this year.

At Tuesday’s Borough Assembly meeting, Assembly members approved a deal which had been received by the Borough on Monday. John Moosey,  Mat Su Borough manager,  says the offer is a serious one.

“At the end of the deal, the Phillipine Red Cross will get it for rescue purposes, humanitarian purposes, and the Borough will net approximately 1.5 million dollars. ”

Under the terms of the agreement, the Phillipine Red Cross will put down a deposit of $250,000 which will cover the Borough’s insurance deductible for the repairs to the ship’s engines.

The International Red Cross will front the Borough $60,000 to cover costs during repairs, and will put down an additional $750, 000, or half the purchase price, now. Contingent on successful repairs, and on an export permit, the Red Cross will fund the vessel’s  remaining $750, 000 purchase price. Moosey says it has not been easy getting a ferry deal

“We have probably for the last six months, we have entertained probably seven serious buyers. The offer that they have agreed to, and we try to get agree to, is that they will pay two hundred fifty thousand dollars up front. We would use that for our insurance deductible to get the engines repaired. If we can deliver the boat, and the engines are repaired, if anybody walks away, in this case if the Phillipine Red Cross walks away, they forfeit that money. So we know they are in for this.”

But there are  potential road blocks to the sale. The Borough still owes the Federal Transit Administration more than twelve million dollars to repay grants that the Borough accepted that were linked to the ferry’s successful operation. But ferry operations never took place, because of a dispute with Anchorage on where to build a ferry landing on the Anchorage side of Knik Arm.

The matter of the FTA debt is in negotiation at this time, Moosey says.

Moosey says the Borough needs to find a company that can make the ferry engine repairs. He also told the Assembly that the Borough has an insurance policy on the ferry with Lloyds of London, which expires August 31, and that company may decide to drop the Borough as a client if repairs don’t start soon.

“We have been sitting on the repair since January. And Lloyds of London said  ‘hey Mat Su Borough, what are you going to do? Are you going to fix it? If you are not going to fix it, we are not going to allow you have insurance after this term expires, because we are not going to insure a boat that doesn’t work.’ So they wanted a plan going forward, and timing wise, this was important to show them that we are moving forward, and we can continue our insurance.”

The 1.75  million dollar price tag is less than half the price the Borough initially asked for the Susitna, but in the past couple of years, various offers by potential buyers of the ship have not panned out. This is the closest we have come to a sale, Moosey told the Assembly on Tuesday.

He also says that federal prohibitions agains selling the vessel to a foreign government may be overcome, because the Red Cross is involved in the deal.

“You know, this is a humanitarian vessel.  It’s used for rescue, tsunamis.  I’ve heard they have well over a hundred and fifty major boating accidents in that area in a year.”

Moosey says that the Borough may seek the help of Alaska’s Congressional delegation if the federal government blocks sale of the vessel to a foreign entity.