The Berbice Bridge Com-pany Incorporated (BBCI) yesterday said it had not concluded an agreement with the government for the reduction of the bridge toll and warned that it could face potential bankruptcy if proposed subsidies are not calculated based on higher tolls that it has been trying to implement.
Responding to Finance Minister Winston Jordan’s suggestion that the company was engaging in “delaying manoeuvres” to stall the planned reduction, the company yesterday also held firm that any government subsidy must be based on increased tolls that were proposed to the former PPP/C administration.
In effect, the company is seeking more than what the current government had expected to payout for the reduction.
In a strongly-worded statement issued yesterday, the company disclosed that revenues of over $1.2 billion had already been lost because tolls had not been increased under the Concession Agreement.
It said too that its directors convened an emer-gency meeting last Thurs-day and concluded that the revised toll schedule per the Concession Agree-ment must form the baseline for computation of the government subsidy. “Any variance from this without the agreement of the shareholders, debt holders and trustees would have exposed the directors to be sued in their personal and professional capacities for failing to perform their fiduciary responsibilities,” it said.
Jordan had stated that while the 2015 budget provides a $36M subvention for the company to facilitate the reduction, it would require between $120M and $140M annually.
At a post-Cabinet media briefing on Friday, Jordan told reporters that government had reached out to the BBCI, which offered an “inconclusive” response after the matter was pursued several times with the company. “With Septem-ber 1 fast approaching, the government is concerned that these delaying and dilatory manoeuvers appeared designed to frustrate the reduction in tolls and hold the travelling public hostage,” he said.
In his budget speech on August 10, the minister had announced that from September 1st, the toll for passenger cars and buses crossing the Berbice River Bridge would be reduced by $300, from $2,200 to $1.900, while the toll for all other types of vehicles will be reduced by 10 percent. The planned reduction is intended to fulfil an elections campaign promise made by the APNU+AFC coalition.
The minister noted the company had proposed an extension in the concession period from 21 years to 40 years, or for the government to consider an application for the toll increases made to the PPP/C government on March 15, 2015.
“I indicated the willingness of the government to enter into a series of discussions on matters of mutual interest, beginning with the implementation of the reductions announced in the budget,” Jordan said, while noting that he also indicated that accountant Christopher Ram would engage the company on the procedures for effecting the reduction.
Jordan recalled that the first meeting between Ram, on behalf of the government, and BBCI Vice-Chairman Ravie Ramcharitar, Bert Carter as well as the BBCI’s Chief Executive Officer and Finance Manager, was held on the same day. Accord-ing to the minister, at the meeting, the company’s representatives indicated their preference to receive any subsidy on a quarterly basis subject to adjustment at the end of each quarter, which was agreed on.
He recalled that the formal proposal was sent to the company the next day but it took over two weeks and several telephone calls before an inconclusive response was finally received.
Fiduciary duty
However, the BBCI yesterday stressed that its directors are constrained by the Berbice Bridge Act and Regulations and in the legally binding Concession Agreement with government. It compared the situation to the government being forced to defer several of its campaign promises based on the need to comply with existing laws,
Nonetheless, the company pointed out that the minister has accepted that no agreement was reached with BCCI and that its team made it clear that nothing could be agreed until the matter had to be brought before its full Board and stakeholders. It also accused the government of proceeding as if its proposal was “a fait accompli” and suggested that it did so to fulfill a campaign promise on the BBCI tolls, which was made without any consultations with the BBCI. “The 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,” it added.
According to the BBCI statement, its directors also noted at last Thursday’s meeting that 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. How-ever, such an increase was deemed untenable particularly after the then Opposi-tion passed a motion in the National Assembly on May 15, 2014 to reduce tolls by more than half. This motion was first tabled in December 2013,” it said.
The company stressed that its directors have “a fiduciary duty” to act the best interest of the company. “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 repay debt in 2015 and possible insolvency,” it warned, while adding that for this year over $500M in debt repayment to inves-tors 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 decision must involve an agreement with the trustee and the shareholders,” it further said, while noting that all investors relied on the toll making adjustment in the financial model that is referenced in schedule 4 of the Concession Agree-ment and projected in the financial model referenced in the Concession Agree-ment.
“The BBCI would expect that government is fully committed to honouring the legislation, concession agreement, and the rights enshrined in the various agreements related to the Berbice Bridge. A subsidy divorced from honoring the BBCI Concession Agreement could very well result in bankruptcy for the BBCI,” it warned, while saying it expected that once agreement is reached with the BBCI, the government and the company will sign an amendment to the relevant agreements and the government will gazette the change in tolls in a revised Toll Order.
“It is our hope and expectation that the Government of Guyana would not want the directors of BBCI to act outside the ambit of their authority, and indeed the law in fulfilling their fiduciary responsibilities,” the company added.
The company also indicated that debt payments are due to the National Insurance Scheme (NIS); Demerara Bank Ltd; New Building Society; Bank of Nova Scotia; Citizens Bank Ltd.; Republic Bank (Guyana) Ltd.; Guyana Bank for Trade and Industry Ltd.; Hand in Hand Trust Corporation Inc.; Trust Co. (Guyana) Ltd.; Hand in Hand Mutual Life Insurance Co. Ltd.; North American Life Insurance Co. Ltd.; North American Fire Insurance Co. Ltd.; Guyana Geology and Mines Commission – Pension; Guyana Power and Light Inc. – Pension; Guyana Sugar and Trade Enterprise – Pension; Hand in Hand Trust – Pension; GAWU – Pension; DDL – Pension; NEW GPC INC.; T. Geddes Grant Guyana Ltd; and Neal and Massey – Pension Scheme.
The company’s ordinary shareholders are Secure International Limited, NIS, NEW GPC, Queens Atlantic Investment Inc., Hand in Hand Mutual Fire and Demerara Contractors Limited. NIS also holds preferred shares.
