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Fishing loans prove tough to land.

Feeling the bite of lower salmon prices in 1991, Alaska's fishing loan programs have been forced to renegotiate with more borrowers than usual.

The state's $68.8 million commercial fishing loan program received more than five times the usual amount of extension requests last winter, following a salmon season plagued by a glutted market and low prices. Meanwhile, the other agency lending money to fishermen and seafood processors -- the Alaska Commercial Fishing and Agriculture Bank -- is feeling the effects of the poor commercial salmon season as well.

An oversupply of pink canned salmon still sitting on warehouse shelves from 1990 pushed down prices by 30 percent in 1991 compared with the previous year, although some salmon species fetched better prices.

The state's loan program received nearly 600 requests for relief in making annual payments for commercial fishing boat and permit loans, says Martin Richard, director of the Division of Investments in Juneau, which handles the loan program. Usually, the division annually receives between 100 and 125 such requests.

Richard calls the 300 extensions for commercial fishing loans approved by the agency "a high amount." He notes, "What most of them are asking for is deferring their payments this year and re-amortizing their loan over the remaining year."

Most of the state's loan payments are due annually between August and December. Each loan extension request is reviewed on an individual basis, Richard says. The state looks at other sources of income the borrower may have, assesses collateral value and determines the likelihood for future payments.

Because the agency deferred $3.2 million in boat and permit payments that were due late last year, it has $3.2 million less available to loan out this year, Richard adds. "We anticipate that the loan demand in the upcoming year is going to be reduced also, and hopefully, those two things will balance out." According to Richard, the loan fund has close to 1,500 loans out worth almost $70 million.

In 1990, the commercial salmon harvest was valued at $550 million, but this past year dropped to $310 million, according to state statistics. Many of Alaska's commercial fishermen faced pink salmon prices of 12 cents a pound last summer, down from 1990's 30 cents a pound.

Most state loans carry a 5-percent late-payment penalty, so if other arrangements are not made and a payment is missed, it hurts, Richard says. "When you're talking an annual payment of $10,000 or $12,000, that's a hefty amount. So the best thing (fishermen) can do is come talk to us."

He says an aggressive outreach program, in which state officials traveled to various communities to educate borrowers about extension options, headed off some repayment problems. "In the short run, I don't see the fund in major danger," Richard says. He explains that dire events this year could create funding problems, while a very successful year could remedy the situation quickly.

Richard adds, "This is a statewide situation, but we're not letting people off just because salmon prices were bad. We're still looking at each request on a case-by-case basis. That means we consider total income and expenses, both fishing and other, of each applicant."

The other primary lender for commercial fishing funds, the Alaska Commercial Fishing and Agriculture Bank of Anchorage, also is facing the effects of a season that started off with a fishermen's boycott of low prices. "Based on what we've seen so far, there is strain out there," says Edward Crane, president of the bank. "We feel a lot of concern and sympathy for our borrowers as individuals, and we're apprehensive about (this) year."

About 70 percent of the bank's $54-million, 600-loan portfolio is loaned to seafood harvesters, or about $37 million, according to the bank's annual report for the fiscal year ending May 1991. Of the remaining borrowers, fish processors account for $11.6 million, and agriculture and timber entities about $5.3 million. One large component of the portfolio is a $12 million loan to Chugach Alaska Corp., a regional Native corporation operating under Chapter 11 federal bankruptcy laws.

Crane says between 60 and 65 percent of the payments due to the bank on commercial fishing loans were made last year, while the bulk of the remainder requested loan extensions or re-amortizations.

In addition, Alaska Commercial Fishing and Agriculture Bank has between 15 and 25 accounts that have not been able to pay even their interest, he adds. "The most critical ones -- that is, the ones with the dimmest future in our eyes -- are those that have been longstanding problems, and the 1991 season seems to have been potentially the final nail in the coffin."

Although Crane feels 1991's problems are manageable, he is concerned about the future. "The apprehension that we do feel is for this coming season, not because we have any fore-knowledge of bad things happening, but in effect this (1991) season used up the cushion for a lot of people," he explains.

The bank has $38 million in capital equity and a loan loss reserve fund of $1.5 million, according to its annual report. Those figures -- along with the presence of good management -- are encouraging, says the bank's board chairman, Gilbert Gunderson of Juneau.

"I'm very confident that we're going to be able to work through this thing. We're not in a position where other banks were, where they invested heavily in real estate and things like that," Gunderson notes.

Although admittedly the season was atrocious for pinks, the damage may not be as widespread as it seems, he says. Southeast fishermen, for example, are known for diversity in fisheries. Not many boats in Southeast rely solely on one species, Gunderson says, and those that do fished twice as hard last year as they did the previous year to make up for low prices.

CFAB board member and commercial fishermen Alan Otness of Petersburg agrees things may not be as bad as they seemed at first, following the poor season. "My feeling is that a lot of people are going to be able to meet their obligations," he says. "What's going to happen (this) year is my concern. (Last) year has already happened and I think most people, at least around here, are going to be able to work through it."

But Otness and Gunderson acknowledge that fishermen in Prince William Sound and Cook Inlet have been drastically affected -- and that CFAB, as well as the state, will feel the pinch. "We're working with (financially strapped fishermen) on an individual basis, on a one-on-one basis, to help them along and still keep the bank viable," Gunderson says.

He's quick to point out that the bank is not allowing slack, except where it's clearly necessary. "There's no real set blanket policy, in other words we're not going to say that anyone who applies for a deferment is automatically going to get one," he adds. Penalties or late payment charges vary from loan to loan, according to Gunderson.

Alaska law created CFAB in 1978, and the state is a major stockholder with $32 million in startup money that must be retired no later than July 2000. Under an agreement made last year, CFAB will pay that money in stages: $2.8 million for fiscal year 1992 and $3 million in each subsequent year. "We couldn't afford to do that if we weren't very confident that we are going to continue to be successful," Gunderson notes.

Crane says the bank is not about to stop making loans because of one bad season. "That's just life when you're in this kind of business."

Lenders, meanwhile, are hopeful the coming season will bode well for seafood harvesters. "This past season was difficult for fishermen across the state," says Richard of the state's commercial fishing loan program. "We can handle a situation like this for a year, but two or three years will be difficult."
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Title Annotation:Commercial Fishing Focus
Author:Ripley, Kate
Publication:Alaska Business Monthly
Article Type:Industry Overview
Date:Mar 1, 1992
Previous Article:Casting about for solutions.
Next Article:ASMI assesses salmon industry's downturn.

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