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CONGRESSMAN ENI F.H. FALEOMAVAEGA From American Samoa U.S. House of Representatives Washington, D.C.

NEWS RELEASE September 14, 2000


Congressman Eni Faleomavaega announced today that he has received further clarification on the terms of the American Samoa Government’s loan from the federal government to be repaid by the tobacco lawsuit proceeds.

"The Department of the Treasury is still calculating the details of how the payments from ASG's tobacco loan will be credited to the loan," Faleomavaega said, "but the basics are that Treasury will make $18.6 million available to ASG, and will accept ASG's tobacco payments each year as the necessary payment on the loan. The principal will be paid first, and then interest. The loan will be calculated at 5.4% for 26 years after which time there may be a balloon payment to compensate for Treasury's cost of borrowing."

Faleomavaega added, "in effect, this is a more favorable re-payment plan for ASG. Initially, Treasury was going to require ASG to repay the loan on a yearly basis at a calculated rate of 6%. Under the terms of the new plan, Treasury has agreed to postpone the difference between its cost of borrowing versus the 5.4% interest rate until the end of the 26 years."

Because the rates at which Treasury will actually borrow the money, and the annual amounts that will be paid from the tobacco settlement cannot be determined in advance, exactly when the loan will be totally paid off is not known. "The point here is that if payments from the tobacco settlement exceed expectations, it is possible that the loan will be paid off in less than 26 years," Congressman Faleomavaega said. "If payments from the tobacco settlement fall below expectations, it is possible that a balloon payment may be required in 26 years."

"It is now up to ASG to determine its course. ASG can choose the 6% pay-as-you go option, which fiscally poses a more expensive route in the present. Or, ASG can choose the 5.4% rate and repay Treasury's costs at the end of the 26 years. Whatever course ASG might choose, the tobacco loan agreement is good for American Samoa. It is a critical and necessary part of putting our fiscal house in order," Congressman Faleomavaega said.

"Once again, I want to commend the Governor for his efforts in bringing closure to this matter. I also want to thank Senator Inouye and other members of the Hawai‘i delegation for putting pressure on Treasury to work out a more favorable agreement for American Samoa," Faleomavaega concluded.

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