The company is owned by the island and since 1969 it has been the only operator of the year round lifeline passenger and cargo service between Guernsey and Sark.
A £300,000 loan agreed between Chief Pleas and the company in 2021 has seen about £270,000 drawn down.
But the government has now accepted that the company will not be able to repay by the original end date of 31 August.
Chief Pleas has called an extraordinary meeting later this month to consider giving a short extension until the end of November to stop the company falling into default.
And it will allow more time for discussions between the island’s Policy & Finance Committee, the Harbours, Shipping & Pilotage Committee, and the IoSS board for a revised loan arrangement to be concluded and for their outcome to be brought back to Chief Pleas.
P&F said that under the current arrangement the company had been paying interest only on the loan and had repaid none of the capital.
The loan is a historic one which has been refreshed at least twice since 2011, when it stood at more than £250,000.
It was reviewed in 2016, when a new interest rate was agreed. No funds have been drawn down since a Covid support package in 2020.
In 2021 it was agreed that renewal of the loan would be a ‘prudent’ move, with repayment due in 2026.
‘The committees consider that a more disciplined and transparent approach is required if the company is to return to a sustainable footing,’ it said in a statement.
But they were satisfied that the new non-executive directors, appointed earlier this year, understood the situation’s seriousness and were ‘taking a constructive and rigorous approach to addressing these issues’.
The plan was for any new arrangement to move IoSS towards repayment of capital rather than continuing indefinitely to repay only interest.
IoSS managing director Mark Roffey had nothing to add to the statement.
‘I can confirm, as it said in the statement, that the board has been in discussion with the shareholder representatives,’ he said.
The company carries 50,000 return passengers on its vessels each year, with an all-year-round service.
The EGM of Chief Pleas will take place on Wednesday 26 August to consider the proposal.
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