i360 loan restructure to be considered by councillors

Senior councillors are being asked to back new loan terms for the attraction, with more than £47 million in total owed to Brighton and Hove City Council.

The new loans terms – a “restructuring” of the seafront attraction’s debt – will enable the council to sweep up any spare cash in the i360 business every six months.

And the first “cash sweep” – scheduled for last Thursday (30 June) – was expected to have brought in a least £700,000, according a report to the council’s Policy and Resources Committee.

The report was published late last month – and the total from the first of the cash sweeps is yet to be finalised.

The i360 would be left with enough money to meet its “cash flow” needs, according to the report, and a major repairs fund would also be built up.

The council also said that under the new loan terms, the i360 would repay its total debt and that none would be written off.

It will also continue to receive 1 per cent of the revenues from ticket sales in perpetuity.

The report, which is due to be discussed at Hove Town Hall on Thursday (7 July), said: “The council will implement a full cash sweep.

“This will ensure that all surplus cash generated by the i360 in the first five years will be paid over to the council in full.

“Thereafter, the cash sweep will continue but will be subject to (an) incentivisation mechanism.

“If the i360 is able to deliver against its business plan forecast, the council will see 38 per cent of the loan principal being repaid in the first five years.”

The incentive will be implemented through a change in the way that the cash sweeps work. Instead of the council taking all spare cash, it will take a minimum repayment amount.

Any surplus would then be shared, with 40 per cent going to the i360 owners who have themselves provided almost £10.5 million in loans to the i360 business.

The minimum payments have been set to reflect seasonal trading peaks and dips, according to the council, with £900,000 due in December, followed by £600,000 at the end of June next year.

If councillors approve the terms, the minimum repayments will start at just over half the level that currently fall due – almost £3 million a year – and are being missed.

The council will account for the repayments cumulatively so, for example, if the December repayment is £1 million and the payment next June is £500,000, the i360 will not be treated as defaulting on its debt because the cumulative minimum of £1.5 million would be covered.

The timetable of minimum payments runs until December 2046 in the papers going before councillors, with the repayments due to rise to almost £3 million a year from 2028.

If the i360 underpays and continues to default on its debt, the report said, the council could exercise its right to step in and take over the attraction.

But the report said that “stepping in was not necessarily the option that would result in the council getting the largest amount of its money back” and “it would immediately result in a writedown of the value of the asset”.

It added: “The existing management of the i360 has the council’s confidence – and the steps they are taking to drive visitor numbers, broaden the appeal of the attraction, improve the food, drink and event offer and cut their cost base show they have a good grasp of the business.

“It is not presently considered that the council would drive additional income by taking over the attraction so the best way to drive income that the council can then take via the cash sweep is to support the existing board and management.”

The new loan terms were due to signed off by the council’s Policy and Resources Committee in May but Labour and Conservative councillors refused to back the restructuring without more details.

They wanted to know how much the council could expect to receive at the end of June.

Councillor Carmen Appich, the joint Labour opposition leader, asked for an assurance that the minimum payment would be more than 1p.

When the committee met in May, councillors were told that, by that date, the i360 had paid £5.882 million relating to the loan.

But it had been due to pay £15.986 million, meaning that £10.104 million had been deferred. More than half of the missed payments – £5.97 million – had fallen due since the start of the coronavirus pandemic.

The Policy and Resources Committee is due to meet at Hove Town Hall at 4pm on Thursday (7 July). The meeting is scheduled to be webcast on the council’s website.

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