Call it insolvent, illiquid, bankrupt, whatever...the bottom line is that the DFC just can't pay its debt to Social Security and now it's trying to renegotiate. 7NEWS has obtained a confidential copy of that refinancing proposal as contained in a May 16th letter from Social Security Manager Narda Garcia to DFC CEO Troy Gabb. It says that the Social Security Board is considering what is called "option 2," which among other things, would give Social Security a seat on the DFC Board, and stipulates there must be a government guarantee for the roll over. Today, Gabb and Financial Secretary Dr. Carla Barnett discussed the plan.
Troy Gabb,
"Mr. Chairman I think your letter speaks of securitization portfolio. I know that part of the loans to the DFC is part of the SSB investment portfolio. But we are to the point making payments towards the SSB and we have a proposal into the SSB in terms of how we're going to handle the arrears. They have subsequently responded and we're reviewing the options that they presented to us. In the meantime we are debt servicing the required components of the loan."
Senator Godwin Hulse,
[To Dr. Carla Barnett] "In the event, as is happening right now of a DFC default, is the government indirectly committed to secure those funds back to the DFC so they'll be no Social Security loss?"
Dr. Carla Barnett,
"What government has said to the Social Security Board is that government would make good on any losses that they would suffer in that and we've written them to that effect."
Senator Godwin Hulse,
"So indeed the Social Security funds, Mrs. Garcia in a previous testimony had concerns that if the DFC defaulted, those were the pool, that was the sums that would the sum in jeopardy. You're saying the government has undertaken to ensure..."
Dr. Carla Barnett,
"We've provided a level of comfort to Social Security Board for that."
Senator Godwin Hulse,
"So that fund would not be in jeopardy in the event of a major default by the DFC which would you say is imminent?"
Dr. Carla Barnett,
"I wouldn't think so."
Barnett said she was not technically prepared to discuss all the guarantees that government presently holds for Intelco.
