By Mary Lynne Dahl
September 17, 2007
Dear Borough Assembly Members and Mayor:
I note on the agenda for the meeting tonight that item 9F, submitted by Mr. Thompson and Mr. Painter, is a motion to begin foreclosure of the KGB contract with Renaissance Ketchikan Group, LLC. I have read the details of this motion as well as the attached Memorandum from Michael Houts and Scott Brandt-Erickson regarding the same motion to begin foreclosure.
I agree with Mr. Thompson and Mr. Painter and I have comments to offer. I have the support of at least 50 local taxpayers and voters in these comments. I suspect that there are more people who will agree with my comments, which I have copied to the Daily News and Sitnews.com.
Mr. Jenkins is not only in default, twice, but is also absolutely not credible. He has not told the truth in the past and I do not believe his statements or promises now. He has given no reason why he can be trusted or believed, but has shown ample reasons why he cannot be trusted or believed. His excuses for why he has not met his deadlines, raised capital and performed as promised are simply that..excuses.
The US is in a severe mortgage lending crisis, due to the sub-prime mortgage meltdown. It is not over yet, according to Wall Street and other financial experts. The impact on lending is serious, affecting the best borrowers and the entire world banking system. This morning there was a run on a large bank in England, with depositors withdrawing so much cash that the bank was in jeopardy of immediate collapse. US banking giants, including investment banking firms, are currently struggling to obtain enough capital from overnight and short term borrowing amongst themselves that they are not interested in loaning to ordinary borrowers. Title companies and mortgage brokerage firms are laying off their employees by the tens of thousands. Money market funds have suffered a liquidity crisis requiring Fed intervention. There is no market for a large percentage of mortgage-backed bonds, of any quality, not just sub-prime paper.
So, in the midst of a lending crisis of these proportions, do you believe that Jerry Jenkins, who has become in default twice on a comparatively small start-up business deal, can obtain financing to run a veneer mill? If banks will not even lend to each other or their best customers, why would they lend to Mr. Jenkins? His business is not only high risk in nature; he also has no experience at running a veneer mill, making him an even riskier potential customer. He mentions "investment bankers" who he says are interested "once he starts production and meets his pro forma projections". Since he has not met any of his projections to date, why would he be able to meet them in the future? What are those projections, anyway? Has anyone in the Borough Finance Department obtained written proof that Mr. Jenkins has interested investment bankers and if so, what have they offered?
He says he has buyers for his product, but is there any solid proof of this? If so, he should get a line of credit from them or an advance on his sales to them, to provide him with the cash he apparently needs.
And with the housing industry in collapse, with home prices dropping in the lower 48, construction firms and builders are experiencing a sharp decline in new home construction. Home Depot and Lowe's reports a drop in building materials demand, as well as a drop in remodeling products demand. So, in light of this, what market is there for veneer made in Alaska, shipped at a greater expense than if purchased in the lower 48? What actual proof has Mr. Jenkins provided that he has solid purchase orders for 100% of the veneer that he can produce? Have you been given anything to substantiate that statement?
The borough has made numerous errors in policy and planning throughout this deal with RKG. The arrears went unnoticed for $198,000 over 6 months. No due diligence was done in the beginning. No proof of various statements and claims has been provided. No effort has ever been made to obtain answers to the questions I posed to Mr. Jenkins a few months ago. Borough assets were pledge as collateral on the loan Mr. Jenkins got from Alaska Growth Capital BIDCO Inc., of Anchorage. The agreement to allow Mr. Jenkins to catch up on his interest arrears with double payments was not a good idea and he is now in default on it as well. No interest or penalties have been required for the arrears in question. Do not get in further with Mr. Jenkins by adding even more errors on top of the ones already made. If the borough forecloses and gets the property back, put it back on the market and let the local real estate professionals have a chance at selling it, instead of doing another auction. Sales commissions are great motivators for finding buyers of good real estate, especially commercial and waterfront properties.
The bottom line is this: Jerry Jenkins does not have a credible, viable plan to secure financing, bring all payments current or operate a veneer mill in Ketchikan. He has not been truthful or forthright. He has failed to give any disclosure. He does not answer honest, direct questions about his business, his background, his financing, his source of funds, his plans or his inconsistencies.
I urge all of you. do not "sit tight" in order to allow Mr. Jenkins to "get on his feet". Do not become the lender of last resort for Mr. Jenkins in very difficult and restrictive lending climate.
Begin foreclosure proceedings now. Doing so will give Mr. Jenkins an incentive to pay the $9 million plus back payments of interest that he owes to the people of Ketchikan Gateway Borough. He says he has the money, so make him put it on the table and pay what he owes. No excuses, no extensions on time or credit, no new deals, no phony promises.
Mary Lynne Dahl
Received September 17, 2007 - Published September 17, 2007
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