Navajo Nation Attorney General Ethel Branch stated in a Dec. 26, 2018, memo to the Navajo Nation Council that Legislation 0448-18, which seeks Budget and Finance Committee approval for the Navajo Nation to invest $15 million into the Navajo Oil and Gas Company “is legally deficient and should be withdrawn.”
Branch also stated, “The legislation suggests that it is modifying and reducing a previously a previously authorized investment in Navajo Nation Oil & Gas Company (NNOGC) for which the Navaj Nation Investment Committee (Investment Committee) conducted due diligence and made a recommendation to the Budget and Finance Committee (BFC) for approval.
“However, that original financing was authorized to facilitate a one-time urgent bail-out, the primary purpose of which was to allow NNOGC to refinance a $74.1 million bank loan they had defaulted on and reinstate their crude oil hedging program to protect NNOGC from future financial uncertainty,” she stated.
Branch noted that the “loan” that Legislation 0448-18 seeks has not been reviewed for due diligence by the Investment Committee as required by the Nation’s Master Investment Policy and it has not been recommended to the BFC by the Investment Committee.
She stated, “Part of the due diligence on the new proposed NNOGC loan/investment should investigate whether NNOGC has sufficient revenues to both cover their debt service to Guggenhein (Partners LLC) on a loan that is millions of dollars greater than the loan NNOGC previously could not pay debt service on, and pay back the Natin on the timeline contemplated in the terms sheet for this now Cummulative Redeemable Preferred Stock Investment.
“The Nation is already investing over $200 million in Navajo Nation Gaming Enterprise, and has had to bail them out repeatedly by reducing their interest rate, most recently from 13 percent to roughly 6 percent which will reduce the Nation’s investment returns by over $100 million, as a then-voting member of the Investment Committee, I voted against this write-off as any prudent investor would,” Branch emphasized.
“For these many reasons Legislation No. 0448-18 is both premature and defective and should be withdrawn,” she stated. “It can be re-introduced when due diligence has been completed and the Investment Committee has made a formal recommendation for investment to the BFC.”
The Budget and Finance Committee is meeting at 8:30 a.m., Thursday, Dec. 27, 2018, in the Budget and Finance Committee conference room, Window Rock, Ariz.
Legislation 0448-18 only requires the approval of the Budget and Finance Committee.