The Tasmanian government has lifted TT-Line’s borrowing limit as the state-owned ferry operator battles mounting debt from its troubled Spirit of Tasmania replacement program.
Treasurer Guy Barnett announced the decision on Saturday, calling it a “temporary” measure to help keep the vessel replacement program on track.
He said it comes after updated advice received on July 25. He did not reveal how much the borrowing limit would rise from the current $1 billion cap.
“Guaranteeing borrowing amounts of government-owned businesses is a routine requirement as part of the ordinary course of business for entities that require borrowings from Tascorp and is a legislated requirement under the Tasmanian Public Finance Corporation Act 1985,” Barnett said.
“This temporary increase in TT-Line’s borrowing limit will provide the confidence the company needs to continue its planned operations.”
The increase comes just weeks before TT-Line was expected to hit its existing borrowing ceiling in September, a situation that could have left the company unable to meet its financial obligations.
The ferry operator has been in financial strife for months. It is already in breach of its debt agreement and struggling to service existing loans.
As reported in March, TT-Line’s interest coverage ratio plummeted to 0.15 times, well below the minimum required level of 1.0.
Adding to the woes is the cost of new berth infrastructure needed to accommodate the replacement Spirit of Tasmania vessels at Devonport’s Berth 3.
The project, years behind schedule, has blown out from an original $90 million budget to a $493 million. The project is due for completion late next year.
TT-Line also had to prop up Finnish shipbuilder RMC with an extra €50 million ($81.6 million) to ensure the new Spirit of Tasmania ships were finished.
Earlier this year, Tascorp chairman Tony Farrell warned the company might need a full government bailout to stay afloat, citing several factors dragging on its finances.
Barnett said the borrowing decision had been shared with Labor under caretaker conventions.
“… The government has consulted on the guarantee with the opposition on this decision,” he said.
TT-Line runs the Spirit of Tasmania service between Geelong and Devonport, carrying passengers, vehicles and freight across Bass Strait.
The service is a vital link for Tasmania’s tourism and freight industries.
