Senior councilors are being asked to back the new loan terms for i360, with more than £47million in total due to Brighton and Hove City Council.
The new loan terms – a “restructuring” of the waterfront attraction’s debt – will allow the council to sweep all available cash into the i360 business every six months.
And the first ‘cash sweep’ – scheduled for last Thursday (June 30) – was expected to raise at least £700,000, according to a report to the council’s Policy and Resources Committee.
The report was released late last month – and the total for the first of the cash sweeps has yet to be finalized.
According to the report, the i360 would have enough money to meet its “cash” needs, and a major repairs fund would also be set up.
The board also said that under the new loan terms, i360 would repay all of its debt and none would be written off.
He will also continue to receive 1% of ticket sales revenue in perpetuity.
The report, which is due to be discussed at Hove Town Hall on Thursday July 7, said: “Council will implement a full cash sweep.
“This will ensure that any cash surpluses generated by i360 over the first five years will be returned in full to the board.
“Thereafter, the cash sweep will continue but will be subject to (an) incentive mechanism.
“If i360 is able to meet its business plan projections, the council will see 38% of the loan principal repaid in the first five years.”
The incentive will be implemented through a change in the way cash transfers work. Instead of the council taking all the money available, it will take a minimum repayment amount.
Any surplus would then be shared, with 40% going to i360 owners who themselves provided almost £10.5 million in loans to the i360 business.
Minimum payments have been set to reflect seasonal trading peaks and troughs, according to the council, with £900,000 due in December, followed by £600,000 at the end of June next year.
British Airways i360 Observation Tower – Photo by Nick Linazasoro
If advisers approve the terms, minimum repayments will start at just over half the level currently due – almost £3million a year – and are missed.
The board will count the refunds cumulatively, for example if the December refund is £1m and the next June payment is £500,000 the i360 will not be considered defaulted as the cumulative minimum of £1.5 million would be covered.
The minimum payment schedule runs to December 2046 in documents submitted to advisers, with repayments expected to amount to almost £3million a year from 2028.
If i360 underpays and continues to default on its debt, according to the report, the council could exercise its right to step in and take over the attraction.
But the report says “intervention was not necessarily the option that would get the council back most of its money” and “it would immediately depreciate the value of the asset.”
He added: “The current management of i360 has the confidence of the council – and the steps they are taking to increase visitor numbers, broaden the attraction’s appeal, improve food, drink and events and reduce their cost base show that they have a good command of the business.
“It is not currently envisaged that the board would generate additional revenue by taking over the attraction, so the best way to generate revenue which the board can then withdraw via the cash sweep is to support the board and the existing leadership.”
The new loan terms were due to be approved by the council’s Policy and Resources Committee in May, but Labor and Conservative advisers declined to back the restructuring without further details. They also wanted to know how much the board could expect to receive at the end of June.
Councilor Carmen Appich, co-leader of the Labor opposition, asked for assurances that the minimum payment would be more than 1 pence.
When the committee met in May, advisers were told that by that date i360 had paid £5.882 million in respect of the loan.
But he was due to pay £15.986m, meaning £10.104m had been deferred. More than half of the missed payments – £5.97million – had been overdue since the start of the coronavirus pandemic.
The Policy and Resources Committee is due to meet at Hove Town Hall at 4pm on Thursday (July 7). The meeting should be broadcast on the board’s website.
