FOLLOWING the requisite consent from most of its bondholders, TransJamaican Highway Limited (TJH) will move forward with the proposed changes to various agreements which will pave the way for it to acquire Jamaican Infrastructure Operator Limited (JIO).

TJH received requisite consent from 81.68 per cent of the holders of its US$225 million senior secured notes due 2036 on December 16. TJH would have paid US$1.25 in cash for each US$1,000 principal amount which constitutes the consent fee totalling US$229,737.50 on December 20. These notes are listed on the Singapore Exchange Securities Trading Limited.

These amendments include a supplemental indenture to the indenture governing the notes, amendments to the direct agreement among JIO, Vinci Concessions, Bouygues Travaux Publics, the Bank of New York Mellon and JCSD Trustee Services Limited and an amended O&M party direct agreement. TJH would increase the amount in the O&M reserve required account from three to six months. There would also be the termination and release of certain guarantees among TJH, Vinci and Bouygues relating to JIO’s payment obligations to TJH under the O&M agreement.

Once the consent fee is deemed to have been paid to each entitled noteholder, the effective date would be established and allow the company to acquire Vinci’s 51 per cent stake in JIO upon the consummation of the consent solicitation. Bouygues’ 49 per cent stake in TJH cannot be sold until National Road Operating and Constructing Company Limited (NROCC) has given approval to changes related to the concession agreement on behalf of the Government of Jamaica. However, the company has a call option granted by Vinci and Bouygues which expires in December 2024 related to the acquisition of their interest in JIO for an aggregate amount of US$16.1 million.

TJH is the company responsible for the development, operation and maintenance of Highway 2000 East-West under a 35-year concession agreement granted by the NROCC while JIO manages and operates the highway on behalf of TJH under an operation and maintenance agreement.

Rating agency Fitch Ratings views the acquisition of Vinci’s stake in JIO as credit neutral which leaves it at BB- with a stable rating outlook. Fitch noted, “Although the O&M fee reduction increases the issuer’s capacity to fulfil its debt commitments, TJH’s rating is currently constrained by Jamaica’s Country Ceiling at ‘BB-‘.

In a tweet no longer visible, posted last Saturday on Twitter, NROCC Managing Director Stephen Edwards said, “If you have received retro pay as part of the Government’s compensation reform, consider investing it in TransJamaican Highway.”

Edwards also sits on TJH’s board of directors where NROCC has the largest stake at 20 per cent in the publicly listed company. NROCC board member Dr Ventley Brown also sits on the TJH board.

TJH has seen a rebound in traffic volumes with the first nine months of 2022 being seven per cent higher than 2019 which was the last year unaffected by COVID-19. This has translated to its revenues increasing 25 per cent to US$47.02 million which is not far from the US$53.29 million earned in 2019. Net profit has also experienced a 134 per cent surge to US$4.14 million which exceeds 2021’s earnings.

Under the proposed changes to the O&M agreement, JIO’s monthly fixed fee component cut by 72 per cent and its variable rate increased from 3.0 per cent to 5.0 per cent on theoretical toll revenues. These changes would cut TJH’s expenses in half and result in JIO sharing more of the variability of the risk of traffic flow. JIO’s fees accounted for 83 per cent of TJH’s 2021 expenses excluding the amortisation of intangible assets.

TJH’s asset base shrunk two per cent year over year to US$309.19 million due to the amortization of intangible assets. Total liabilities went up to US$257.92 million with shareholders equity at US$51.27 million.

TJH’s stock price hit a record $1.91 and US$0.0117 in April but has since trended back to $1.39 and US$0.0099 which is just below the initial public offering price of $1.41/US$0.01. TJH paid a US$7 million ($1.07 billion) dividend on October 25 to its ordinary shareholders.

TJH is expected to operate phase 1C of Highway 2000 East-West which is to extend the toll road by 28km. The US$188.5 million project was 82 per cent complete in September and is expected to be completed by March 2023. NROCC is now negotiating with TJH for the sale of Phase 1C of the highway.