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���������ֳ� - Monterrey - 13 Nov 2024: ���������ֳ� has affirmed TransJamaican Highway Limited's (TJH) senior secured notes at 'BB'. The Rating Outlook is Positive.

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 exchange (FX) rate between the Jamaican dollar (JMD) and the U.S. dollar (USD). Debt is USD-denominated, senior secured, and has typical project finance features that include limitations on additional indebtedness.

The rating case minimum and average debt service coverage ratio (DSCR) are at 2.0x in 2035 and 2.4x, 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, even though the credit profile withstands domestic economic shocks beyond those observed between 2008 and 2014 when the Jamaican economy deeply deteriorated, the transaction is ultimately capped at Jamaica's Country Ceiling of 'BB' because of transfer and convertibility risk.

TJH's Positive Outlook mirrors the Positive Outlook of Jamaica's 'BB-', as a reflection of the potential for reduced concerns of higher risk of controls on convertibility and the transfer of foreign currency to serve the USD-denominated debt.

KEY RATING DRIVERS

Revenue Risk - Volume - Midrange

Strategically Located Essential Asset

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. Long-term growth prospects are supported by its strategic importance to the country and the currently low motorization rates in Jamaica, which present potential for increase.

Revenue Risk - Price - Midrange

Adequate Rate Adjustment Mechanism

Toll rates are adjusted annually using an escalation formula based on the U.S. CPI and the FX rate (USD/JMD) evolution. There is an additional 1% increase until the foreign debt is repaid in full, in accordance with the maximum capped toll level of that period. Additional increases are applied if the 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.

Infrastructure Dev. & Renewal - Midrange

Fully Operational Asset

The toll road has been fully operational since 2012. An independent engineer annually reviews the O&M plan and budget. The structure holds a six-month O&M reserve account, as well as a major maintenance reserve account funded with 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 that the concession currently ends in 2036.

Debt Structure - 1 - Midrange

Typical Debt Structure

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 debt service coverage ratio (DSCR). No FX risk is anticipated given the formula for an increase in toll rates captures movements in the JMD/USD exchange rate.

Financial Profile

Under ���������ֳ�'s Base Case, the project yields a minimum and average DSCR of 2.4x in 2035 and 2.6x. Under ���������ֳ�'s Rating Case, the project yields a minimum and average DSCR of 2.0x in 2035 and 2.4x, respectively, which is strong for the rating category under the indicative thresholds of the applicable ���������ֳ� criteria, but ultimately constrained by Jamaica's Country Ceiling.

PEER GROUP

The closest project in the region is Autopistas del Sol, S.A. (AdS; B+/Positive Outlook) 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 1.3x versus 2.4x of TJH under ���������ֳ�'s rating case).

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

--Weakening of the credit profile of the Jamaican sovereign, particularly the risk of imposing capital controls affecting the ability to convert currency;

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

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

--Strengthening of the credit profile of the Jamaican sovereign, particularly the risk of imposing capital controls affecting the ability to convert currency.

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.

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

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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. ���������ֳ�'s ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on ���������ֳ�'s ESG Relevance Scores, visit /topics/esg/products#esg-relevance-scores.

Additional information is available on

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