Shipping loan extended after financial concerns

A £300,000 loan to an island shipping firm has been extended and a warning issued over the need for improvements to the company's financial reporting and governance.

The move by the government of Sark in the Channel Islands on the loan to the Isle of Sark Shipping Company, comes weeks after it emerged the island-owned ferry operator was at risk of defaulting on the loan when it becomes due on 31 August.

About £270,000 of the loan facility has been drawn down and none of the capital has yet been repaid.

The shipping company operates Sark's year-round passenger and freight link with Guernsey, carrying about 50,000 return passengers each year.

Sark's governing Chief Pleas agreed to extend the loan arrangement until 30 November on its existing terms. The extension does not increase borrowing or provide additional public funding, and was approved to prevent an immediate default while discussions continue over a longer-term arrangement.

In a statement, the Policy & Finance Committee said: "This is a disciplined and practical decision, but no one should mistake it for satisfaction with the current position."

The committee said Chief Pleas should not have been left facing "fundamental questions" about the company's finances and financial reporting. It added that weak reporting, outdated systems and delays in management information had made proper oversight more difficult than it should have been.

The committee stressed that the extension was not an endorsement of the company's current position. Instead, it said the extra time should be used to develop a revised agreement, including plans for capital repayment, for consideration at Chief Pleas' budget meeting later this year.

The committee also expressed confidence in the company's recently appointed non-executive directors.

It said: "The Policy & Finance Committee have confidence in the new non-executive directors and are satisfied that they understand the seriousness of the position, understand what needs to change, and are taking a constructive and rigorous approach to addressing these issues."

Chief Pleas said it would continue working with the company's board to address the financial and governance issues behind the current situation.

The Isle of Sark Shipping Company has been contacted for comment.

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