MEMORANDUM. Board Members Alaska Industrial Development and Export Authority

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1 MEMORANDUM To: From: Board Members Alaska Industrial Development and Export Authority John Springsteen Executive Director Date: April 28, 2016 Subject: Loan Request Loan Summary Kalinin Partners, LLC Loan Resolution No. L16-04 First National Bank Alaska (FNBA) requests AIDEA s participation of $6,390,000 (90%) in a $7,100,000 loan. Term Lender Amount Term Structure AIDEA $6,390, years Fixed for 15 yrs. FNBA $710, years Variable Total $7,100,000 Borrower Guarantor Use of Proceeds Project Kalinin Partners, LLC Kalinin Holdings, Inc.; Air Excursions, LLC; Kalinin Aviation LLC; Kent Craford; Michael Craford; James Stedman Refinance hangar and aircraft. Hangar located at 8907 Yandukin Drive, Juneau, Alaska. Economic Development/ Job Creation The borrower will benefit from switching from a variable rate on four different loans ranging from 4.75% to 4.99% to one fixed-rate loan at 3.84%. In addition, the borrower has a balloon payment on one loan in the amount of $560,344 that would be due at maturity, in The borrower will be saving $6, monthly and $72, annually by this refinance. This business supports and provides economic benefit to many southeastern communities. Approximately jobs will be created and 15 jobs retained as a result of this project.

2 Memorandum AIDEA Board Members April 28, 2016 Page 2 Management The principals are Kent Craford, CEO and James Stedman, COO. Kent has experience in aircraft management dating back to James has been a pilot in Southeast Alaska for over 30 years. Market Alaska Seaplanes has grown considerably over the last three years, expanding service to new routes, and taking on additional Essential Air Service (EAS) and mail contracts for outlying communities. They also acquired one of their primary competitors (Air Excursions) in 2011, resulting in a smaller number of carriers operating in northern Southeast Alaska. It has been reported in the media that the ferry system plans to reduce service by more than 20% as a result of budget cuts. Much of the displaced customer traffic will need to fly via scheduled air service as a result of the ferry system cuts. Wings of Alaska recently announced that it was closing all Alaska operations. The DBA for Wings of Alaska was sold to a much smaller competitor on October 10, The new owner of the Wings DBA (Fjord Flying/Rich Cole) has plans to take over the brand name, but is unable to offer scheduled service, and has a much smaller fleet of aircraft. As of October 30, 2015, Wings had vacated their counter space at the Juneau airport, although they are rumored to be seeking a different space. They are no longer selling scheduled tickets, and it appears there will be a significant reduction in the number of flights as a function of the sale. As a result, Seaplanes will likely have an opportunity to significantly increase market share in those routes previously operated by Wings of Alaska. Collateral and Value Deed of Trust; recorded first lien position on hangar located at 8907 Yandukin Drive; Juneau, AK. Julie C. Dinneen, MAI from Julie Dinneen Company appraised the facility to have a $1,375,000 As Is market value. Douglas Solberg, a seasoned aircraft appraiser, provided appraisals on the aircraft with a combined market value of $8,447,000. Combined collateral provides a 72% loan to value, which is within AIDEA guidelines. The combined entities have established sufficient cashflows to service the proposed debt for the past two years, providing a debt coverage ratio of 3.11:1 and 1.35 respectively. AIDEA will require an assignment of the City of Juneau land lease as well as release provisions for the aircraft.

3 Memorandum AIDEA Board Members April 28, 2016 Page 3 Financial Information Specific confidential financial information will be provided to Board members under separate cover. Environmental No issues noted. Strengths Guarantor Financial Strength Experienced Operators Outlook for tourism is excellent Minimal competition in expanding market Slightly lower loan to value of 72% Weaknesses Industry risk; mitigated by insurance and safety program Portfolio Diversification As of December 31, 2015, AIDEA had.05% of its total statewide portfolio in the Aircraft industry. This will increase to 1.96%. For participated loans within the Southeast region, 0% of AIDEA s total portfolio is attributed to the Aircraft industry. This loan will increase penetration of the Aircraft industry to 10.74% in the Southeast region. Recommendation Staff recommends approval as presented.

4 AIDEA Credit Presentation BORROWER: Kalinin Partners, LLC Bank: First National Bank Alaska CO-BORROWER: ADDRESS: 1873 Shell Simmons Dr. Ste 110 Juneau, AK Date: 4/28/16 C-Corp S-Corp LLC General Partnership Ltd Partnership Sole Proprietorship Individual BOND SALE BUSINESS: Commercial Air Service NAICS: GUARANTORS: Kalinin Holdings, Inc.; Air Excursions, LLC; Kalinin Aviation LLC; Kent Craford; Michael Craford; James Stedman LOAN PURPOSES: Refinance New Construction Acquisition Assumption Equity Extraction Energy Development Project LOAN PROGRAM: Loan Participation Business Assistance Program OREO Sale AIDEA 100% Owned COMMITMENT TERM: 6 months ANTICIPATED FUNDING DATE: May 31, 2016 JOBS CREATED/RETAINED: new jobs created; 15 jobs retained PARTICIPATION Loan Amount Percentage Rate Payment Monthly Annual Term FNBA $710,000 10% Variable $7, $90, years AIDEA $6,390,000 90% Fixed $46, $561, years Related debt TOTAL $7,100,000 $54, $651, Effective Amo: 15 years GUARANTEE Loan Amount Guarantee Percentage Guarantee Amount Rate Payment Monthly Annual Term Originator COLLATERAL DESCRIPTION AND Description VALUE Appraisal Date Source Appraised Value Loan to Value See Attached Collateral Exhibit for Aircraft See Attached See Attached $8,447,000 72% Combined Hangar located at 8907 Yandukin Drive Juneau, Alaska March 13, 2016 Julie C. Dinneen, MAI Julie Dinneen Company $1,375,000 Comments: Loan Committee approved this participation request on March 29, CONDITIONS OF APPROVAL

5 ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY LOAN RESOLUTION NO. L16-04 A RESOLUTION OF THE ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY REGARDING PURCHASE BY THE AUTHORITY OF A PARTICIPATION IN KALININ PARTNERS, LLC. WHEREAS, First National Bank Alaska has filed an application with the Alaska Industrial Development and Export Authority (the Authority ) requesting that the Authority purchase a participation in a loan to Kalinin Partners, LLC (the Loan ) under the Authority s loan participation program (AS et seq.); WHEREAS, the nature, purpose and terms of the Loan and the Authority s participation are described in the memorandum from Authority staff attached (the Memorandum ); WHEREAS, staff of the Authority has recommended that the Authority purchase the participation in the Loan, subject to certain conditions, as described in the Memorandum; WHEREAS, the Authority s participation in the Loan is consistent with all requirements for such participation provided in AS et seq. and the applicable regulations of the Authority related to such participations provided in 3 AAC ; WHEREAS, it is the Authority s policy that the purchase of a loan participation be approved by the Authority s board if the Authority s participation in the loan will equal or exceed $3,000,000, or if the aggregate amount of the Authority s participation in loans to any borrower or guarantor will exceed $5,000,000; WHEREAS, the dollar amount of the subject participation is $6,390,000;

6 WHEREAS, First National Bank Alaska requests the Authority to purchase $6,390,000 (90%) of the $7,100,000 Loan; and WHEREAS, it is in the best interest of the Authority that the Authority purchase the participation in the Loan, subject to conditions recommended by staff as described in the Memorandum. NOW, THEREFORE, BE IT RESOLVED BY THE ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY AS FOLLOWS: Section 1. The Authority s purchase of the participation in the Loan as described in the Memorandum is approved, subject to the conditions recommended by staff as set forth in the Memorandum. The Executive Director is authorized to approve such non-material changes in the terms and conditions of the Loan and the Authority s participation as the Executive Director, in his discretion, determines appropriate. Section 2. The Executive Director of the Authority and the Director of Commercial Finance of the Authority are authorized to take such actions as may be necessary or convenient to consummate the purchase of the participation in the Loan including, without limitation, issuing a commitment with respect to the Authority s participation in the Loan. DATED at Anchorage, Alaska on this 28 th day of April, (S E A L) A T T E S T Chair Secretary AIDEA Loan Resolution No. L16-04 Page 2