Bankruptcy looms if subsidies based at present rates
Berbice Bridge toll reductions…
…Directors duty-bound to inform stakeholders
Despite the subsidies promised, the Berbice Bridge Company Inc (BBCI) indicated that while it sup-ports moves to
make the Berbice crossing more affordable, it could go bankrupt if Government arbi-trarily moves ahead with the toll reduction without fully honouring the legally binding agreement be-tween the Company and the Government to have tolls adjusted within specified timeframes.
Both the A Partnership for National Unity and Alliance For Change (APNU/ AFC) precipitated this situation when they used their one-seat majority in the 10th Parliament to pass a motion on March 10 2015 to lower the Berbice Bridge tolls without taking into consideration that the move was an in-fringement on a legal agreement and that the Company would incur significant losses. At that time, the company had applied to the then PPPC administration for the legally specified toll adjustments.
Finance Minister Winston Jordan on Friday blamed the Bridge Company for the setback in the toll reductions, which Government announced would take effect on September 1.
“With September 1, fast approaching, the Government is concerned that these delaying and dilatory manoeuvres
appeared designed to frustrate the reduction in tolls and hold the travelling public hostage,” Jordan exclaimed.
However, in response, the Bridge Company issued a release, expressing its rejection over the Minis-ter’s accusation.
The Company explained that its Directors are constrained by the Berbice Bridge Act and Regulations and the Concession Agreement – the legally binding agreement between the Government of Guyana and the BBCI; therefore, it cannot introduce a reduction without proper discussions with its principals the shareholders, bond holders and trustees.
In fact, the Company pointed out that no fixed agreement ha even been reached in relation to toll reductions as the discussions are still ongoing between Government and the BBCI Directors.
“Discussions also took place concerning the timing of subsidy payments, but BBCI team made it clear that nothing could
be agreed upon until the matter had been brought before its full Board and stakeholders,” the Company stated.
It also noted that Government has other obligations to honour before the Company agrees to toll reductions.
“The Government proposed a schedule of subsidies to commuters based on the existing toll struc-ture. But the Minister also accepted that “the Company would like further discussions to take place on the proposal and an extension in the concession period from 21 years to 40 years: or for the Govern-ment to give consideration to an application for an increase in toll made to the PPP/C Government on March 15, 2015.” The Minister has accepted that no agreement was reached with BCCI,” BBCI stated.
The Company also noted that, “the Government in other fora proceeded as if its proposal was au fait accompli, simply to fulfil a campaign promise on the BBCI tolls, which was made without any consultations with the BBCI.
The au fait accompli was that its proposed commuter subsidy would be based on the existing toll structure, and that the revised toll structure as adumbrated in the Concession Agree-ment, and brought to the attention of the Government, would be ignored. The other win-win scenario of an extension of the concession period that would have allowed the present toll structure and the subsidy levels proposed by the Government would presumably also be placed in doubt.”
Against this background, the Directors convened an Emergency Meeting on August 27 to discuss a way forward on the toll reductions.
“Based on the figures that had been submitted to the Government, because tolls had not been in-creased based on the Toll Formula under the Concession Agreement, revenues of $1,228,523,720 had already been lost,” the Company said.
It also noted that because of the then Opposition’s successful move to lower the tolls in the 10th Parliament, the Company is already heavily indebted due to revenues lost.
“In June 2014, based on its financial model and debt commitments, BBCI began to repay the principal on its bonds. This increase in demand for cash was supposed to have been met by increases in tolls. However, such an increase was deemed untenable particularly after the then Opposition passed a mo-tion in the National Assembly on May 15, 2014 to reduce tolls by more than half. This motion was first tabled in December 2013,” the Bridge Company said.
Therefore, the Company said any agreement to a subsidy without honouring the toll adjustment formula set out in the Concession Agreement will result in the BBCI defaulting on its obligation to re-pay debt in 2015 and possible insolvency.
“In 2015, over $500 million in debt repayments to investors is required. Directors cannot change the agreements reached with the investors in the bridge as represented by the Trustee for the debt and the Shareholders for the equity. Such a decision must involve an agreement with the Trustee and the Shareholders.
As such, any change in the Concession Agreement and the Toll Order which is made by the Govern-ment (the last one was made in 2009 by the Minister of Public Works), requires the approval of the Trustee and the shareholders. All investors relied on the toll making adjustment in the financial model that is referenced in Schedule Four of the Concession Agreement and projected in the financial model referenced in the Concession Agreement,” the Company explained.
“A subsidy divorced from honouring the BBCI Concession agreement could very well result in bank-ruptcy for the BBCI,” it reiterated.
The Company noted that it is willing to provide the best service to the Berbice Bridge commuters at an affordable cost but reminded that it also has to fulfil their fiduciary responsibilities and also act in accordance to the law.
During his budget presentation, Jordan had indicated that from September 1 this year, the toll for passenger vehicles crossing the Berbice Bridge would be reduced from $2200 to $1900.
The move, he said, was the first of a phased reduction of the tolls which he said have been a worri-some issue for Guyanese, particularly those living in Region Five (Mahaica-Berbice) and Region Six (East Berbice-Corentyne).
The annual subsidy for the BBCI, Jordan informed, stands between $120 million and $140 million.
However, it was already established by observers that the toll $300 toll reduction will not benefit those who really need it, given that the everyday commuter who normally uses public transportation given that bus drivers and taxi drivers already insisted that they will not lower their fares, citing its in-significance.