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���������ֳ� - Mexico City - 20 Jan 2022: ���������ֳ� has affirmed the 'BB-' rating of TransJamaican Highway Limited's (TJH) senior secured notes. The Rating Outlook is Stable.

RATING RATIONALE

The rating reflects the stability and resiliency of a commuting asset strategically located in the outskirts of Kingston, Jamaica's capital city. The rating is also supported by a satisfactory rate-setting mechanism, which allows tariffs to be adjusted annually by U.S. inflation and the variations in foreign-currency (FX) rate between the Jamaican dollar (JMD) and the U.S. dollar (USD). Debt is senior secured, with typical project finance features that include limitations on additional indebtedness.

Rating case minimum and average debt service coverage ratio (DSCR) are at 1.7x in 2035 and 2.1x, respectively, which are viewed as strong for the rating category according to applicable criteria. The transaction presents robust break-even values for its most important variables and no dependency on traffic growth in order to repay the rated debt. Furthermore, it withstands domestic economic shocks beyond those observed between 2008-2014 when the Jamaican economy deeply deteriorated, supporting a rating above that of the Jamaican sovereign (B+/ROS), but constrained by Jamaica's Country Ceiling of 'BB-'.

KEY RATING DRIVERS

Strategically Located Essential Asset [Revenue Risk - Volume: Midrange]:

The toll road is the main link between the capital city of Jamaica, Kingston, and other populated urban and industrial centers including the cities of Portmore and May Pen. The asset is currently the only high-speed roadway serving the western part of Kingston's metropolitan area, with an estimated population of 1.4 million people along the corridor. Growth prospects in the long term are underpinned by its position as a strategic asset for the country, along with the fact that motorization rates in Jamaica are still low, so there is potential to increase.

Adequate Rate Adjustment Mechanism [Revenue Risk - Price: Midrange]:

Toll rates are adjusted annually using an escalation formula based on the U.S. CPI and the FX rate (USD/JMD) evolution, plus an additional 1% until the foreign debt is repaid in full, in accordance with the maximum capped toll level of that period, with additional increases if USD/JMD exchange rate depreciates by more than 10% intra-period. TJH is allowed to annually increase toll rates, but any change needs to be authorized by the roll regulator. If the toll regulator does not authorize such toll rates, the concessionaire would need to be compensated for the lost revenue. ���������ֳ� believes it is unlikely that the regulator would choose to cut prices given the toll rates' updated track record since 2009.

Fully Operational Asset [Infrastructure Development & Renewal: Midrange]:

The toll road has been fully operational, with its four toll plazas, since 2012. It benefits from oversight from an independent engineer who provides financial annual reviews of the budget and the O&M plan and a commentary of the six succeeding semesters. The structure holds a three-month operations and maintenance reserve account, as well as a major maintenance reserve account funded with 100% of the costs to be carried out in the next 12 months, 50% in the next 13 to 24 months and 25% in the next 25 to 36 months. The assessment on this attribute is somewhat limited by the hand back requirements as included in the concession, which oblige the concessionaire to return the project to the grantor in a good and operable condition.

TJH has executed an amendment to the concession agreement in which the tenor could be renewed, at any time during 2034, at TJH's request for an additional 35 years. With this updated agreement, the hand back requirements will fall after the maturity of the notes. Nonetheless, ���������ֳ�'s financial projections assume such expenses will be made in 2035-2036, given the concession currently ends in 2036.

Typical Debt Structure [Debt Structure: Midrange]:

The notes are senior, fully amortizing, fixed-rate and with typical project finance covenants. There is a six-month debt service reserve account and a lock-up trigger at a 1.25x backward- and forward-looking DSCR. No FX risk is anticipated given the formula for toll rates increase captures movements in the JMD/USD exchange rate.

PEER GROUP

The closest project in the region is Autopistas del Sol, S.A. (AdS; B/RON) in Costa Rica. AdS and TJH are similar, as both are strong commuting assets within their respective country's capital cities. They also share all attributes at the Midrange level, but the difference in ratings comes from AdS's lower metrics (average DSCR of 1.1x versus 2.1x of TJH under ���������ֳ�'s rating case).

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

--Negative rating action on Jamaica's Country Ceiling;

--Nil or negative traffic growth rate for a sustained period.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

--Positive rating action on Jamaica's Country Ceiling.

Best/Worst Case Rating Scenario

International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit /site/re/10111579.

TRANSACTION SUMMARY

TJH's concession stretches for 49.9km, connecting Kingston with May Pen, and is divided in two fully operational corridors. The first corridor stretches between Kingston and May Pen, with three toll plazas: Spanish Town, Vineyards and May Pen. The other corridor, also called the Portmore Causeway, begins on Marcus Garvey Drive in Kingston and end on Dyke Road in Portmore. The toll road is the largest infrastructure project in Jamaica. In 2020, TJH issued senior secured debt for USD225 million through a fully amortizing bond maturing in 2036 with a fixed 5.75% coupon rate.

CREDIT UPDATE

From January to September 2021, annual average daily traffic (AADT) was 60,509 vehicles, representing a 7.6% compared with the same period of the previous year. The latter was in line with ���������ֳ�'s rating case projection. Out of the four toll plazas along the road, Portmore, which is the one that is mostly used by commuters, has had the slowest recovery, while the rest of the sections with greater participation of commercial vehicles and lesser traffic restrictions have had greater resilience and a faster recovery.

Tariff increases were dully applied in June of 2021 resulting in a weighted average annual increase of 11.3%. In terms of revenue, the project collected USD37.5 million as of the third quarter of 2021, 15.2% more than in the same period of the previous year, and above ���������ֳ�'s rating case expectations. As the traffic mix has remained practically unchanged since the beginning of the pandemic, the strong performance is explained by the traffic and tariff growth.

As of September 2021, operating expenses were USD15.9 million, below ���������ֳ� rating case projections. In terms of capex, according to the concessionaire, the implementation of multimodal toll booths across all corridors will continue along 2022.

Overall, the higher-than-expected toll revenue collection coupled with expenses in line with the budget resulted in a DSCR of 1.9x, from October 2020 to September 2021, and comparably above ���������ֳ�'s projections of 1.7x for 2021.

FINANCIAL ANALYSIS

���������ֳ�'s base case assumes a full traffic recovery of 2019 levels in 2022 based on the following quarterly average activity assumptions: 97% through the first quarter, 100% in the second and third quarters, and 102% in the fourth quarter, and then a 4.2% growth for 2023. Afterwards, it assumes a compounded annual growth rate (CAGR) between 2024 and 2036 of 2.3%. The cost profile assumed is in line with the sponsor's original assumptions plus a 5% increase. Inflation was assumed at 3.8% in 2022, 3.8% in 2023 and 3.5% from 2024 and onwards. Under this scenario, the minimum and average DSCR are 2.0x and 2.4x, respectively.

���������ֳ�'s assumes a traffic recovery of 97% of 2019 levels in 2022 based on the following quarterly average activity assumptions: 94% through the first quarter, 96% in the second, 97% in the third quarter, and 99% in the fourth quarter, and then a 5.3% growth for 2023. Then, it assumes a compounded annual growth rate (CAGR) between 2024 and 2036 of 1.3%. Operating, general and administrative, and maintenance budgeted expenses are increased by 7.5% throughout the tenor of the debt. Inflation assumptions are as in the base case. Rating case metrics are slightly weaker than that of the base case, with minimum and average DSCR of 1.7x and 2.1x, respectively.

The transaction presents robust break-even values for its most important variables and no dependency on traffic growth in order to repay the rated debt, supporting the project rating above the sovereign rating.

SECURITY

An onshore all assets debenture providing for (subject to certain exceptions and limitations) a first priority security interest in all present and after-acquired personal property of the Issuer including all Project documents to which it is party, including the Concession Agreement, and the local accounts, and further providing for an assignment of the benefit of the Concession Agreement and the other project documents; an assignment of the concession agreement providing for a collateral assignment of the Issuer's interest in the Concession Agreement; an onshore security trust deed providing for the appointment of the local trustee and for the transaction security to be held on trust for the Secured Parties; the offshore accounts under the Indenture Trustee.

Sources of Information

The principal sources of information used in the analysis are described in the Applicable Criteria.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on ���������ֳ�'s ESG Relevance Scores, visit

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APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

• Third-party Model (1)

ADDITIONAL DISCLOSURES

• Dodd-Frank Rating Information Disclosure Form
• Solicitation Status
• Endorsement Policy

ENDORSEMENT STATUS