TransJamaican raising debt and equity capital - Up to $46b targeted from IPO and bond

TransJamaican Highway Limited, TJH, which operates the East-West leg of Highway 2000, plans to raise up to $14 billion through an initial public offering on the market at $1.41 per share.

The offer will open on February 17 and close March 9.

But just before that TJH will also be approaching the debt market to raise US$225 million – which translates to nearly $32 billion in local currency or more than twice the prospective equity raise. The bond that will be used to refinance ­­existing debt at cheaper interest rates.

TJH holds total assets of US$293 million and after factoring liabilities led by debt, and capital of US$59 million up to December 2019.

Core earnings before interest, tax, depreciation and amortisation, or EBITDA, is projected to grow at a compounded rate of 3.8 per cent over the period 2019-2036.

TransJamaican, which was initially controlled by French company Bouygues Travaux Publics, was taken over by the Jamaican Government as part of the ­privatisation of the toll road operator.

With the takeover, state-run National Road Operating & Constructing Company Limited, NROCC, became the toll road ­concessionaire. NROCC plans to use the IPO proceeds to repay debt used to ­purchase TJH from its foreign shareholders.

The offer is for eight billion units at $1.41 per share, with the possibility of upsizing it to 10 billion units – valuing the IPO between $11 billion and $14 billion.

TransJamaican’s audited financials published with the prospectus show that the company made US$39 million in revenue over nine months ending September 2019, which was flat year on year. Net profit fell to US$2.1 million from US$5.8 million a year earlier due to higher debt financing charges.

NROCC currently holds 100 per cent of the common shares in the company, the majority of which will be made available to investors in the IPO: 26 per cent is being offered to the general public; 20.7 per cent to pension funds; 20.7 per cent to underwriters of the offer; 8.3 per cent to public sector workers; and 0.9 per cent to employees of concession companies NROCC, TransJamaican Highway, and Jamaican Infrastructure Operator Limited.

NROCC will retain 20 per cent of the ordinary shares; as well as US$27 million worth of preference shares that the state agency plans to sell down over time.

Pre-IPO, the preference shares held by NROCC entitled the agency to half of TransJamaican’s distributable income.

“NROCC will no longer be entitled to participate in the company’s profit through ownership of the preference shares. NROCC will seek to sell down their preference shares at date in the future via a private placement or public offer for sale,” stated the prospectus.

Meanwhile the US$225 million bond to be floated on the international market has received a BB- rating from Fitch Rating Agency, a rating higher than that of the Government of Jamaica’s B+.

“I am told it is one of only two infrastructure assets in Latin America that has a rating higher than the sovereign, the other being the Panama Canal,” said Steven Gooden, CEO of NCB Capital Markets Limited, which will co-manage the transaction.

The rating placed the bond at just below investment grade.

The debt instrument is expected to mature in 2036. Its pricing will be finalised at the end of a road show currently under way, Gooden told the Financial Gleaner.

NCB Cap, which is also the lead broker for the TransJamaican IPO, expects the subscriptions to triple the 30,000 that flocked to Wigton – which would make it the most sought-after IPO in local history.

steven.jackson@gleanerjm.com