House Approves Government Guarantee To NROCC

The House of Representatives on Tuesday (Jan. 13) approved a Government of Jamaica guarantee under the provisions of the Approved Organizations and Authorities Act to secure a loan of US$75 million from Wachovia Bank to the National Road Operating and Constructing Company Limited (NROCC).
The government guarantee for the loan which will secure the financing for the completion of Phase 1 of the Highway 2000 project, replaces the approval given by the House in January last year for a guarantee to secure the issue of the US$75 million infrastructure bonds by NROCC.
Last year, the House also approved the issue of GoJ guarantee to secure a loan for interim financing of US$40 million to NROCC from ABN AMRO Bank. Subsequent to the House’s approval, NROCC ceased negotiations with ABN AMRO, which was mandated to arrange the infrastructure bond facility, as that institution, according to Finance and Planning Minister, Dr. Omar Davies, had not lived up to expectations.
Additionally, he said, the high-effective pricing of the transaction arose primarily from an increase in the Overseas Private Investment Corporation’s (OPIC) insurance premium and which resulted in the overall cost of the facility increasing from 7.93 to 8.76 per cent as at July 31, 2003 for a 15-year tenor.
NROCC subsequently received and accepted a proposal from Wachovia Bank N.A, the terms of which include a 15-year tenor on a OPIC guranteed loan of US$75 million loan, (with a five year moratorium on the principal) to replace the previous bond issue. The terms also include an interest rate of 5.80 per cent (6.26 per cent inclusive of interest rate cap), with a government guarantee. Since the source of funding has changed from an infrastructure bond to a bank loan, the Attorney General’s Department has advised that a new guarantee would be required.
Dr. Davies, who moved the motion, explained that “NROCC which obviously does not have the balance sheet to justify such a loan on its own, needs a GoJ guarantee as a security”.
Responding to questions concerning expenditure for the project raised by Opposition Spokesman on Finance, Audley, Shaw, Dr. Davies said that disaggregation of expenditure levels could be provided at a later date. He informed however, that the project was on schedule and that in fact, the second part of Phase I would be ahead of the time scheduled for completion. He also noted that the Old Harbour Bypass had now been transferred to NROCC and that the Ministry of Finance and Planning was responsible for the financing of the Kuwaiti loan, which partially funded the construction of the old bypass.