Road King Infrastructure Limited announced that it has successfully tendered for the acquisition of 49% equity interest in the Anhui Machao Expressway Co., Ltd which will own the operating rights of the Machao Expressway for a period of 30 years.
Upon completion, the target company will be held as to 49% by Road King and as to 51% by the vendor.
In addition to the tender price of RMB271 million (US$44.4 million) for the equity interests, Road King is required to provide financing to the target company for the repayment of vendor loans of RMB1.161 billion (US$190.4 million) in principal amount. In addition, Road King has budgeted potential additional funding of RMB502 million (US$82.3 million) to enable the target company to settle all pre-operation costs of the Machao Expressway.
Moody's estimated that Road King's debt will increase by about 9-10% as a result of the transaction as the company could provide a shareholder's loan and raise debt to settle the costs incurred before the expressway began operation.
The target company was established in the People's Republic of China on 6 December 2010 with a registered capital of RMB286 million (HK$60.2 million). The company is engaged in the planning, construction, operation and management of the Machao Expressway.
The Machao Expressway is a 35.77km dual three-lane expressway and is a significant part of the Anhui Province Yan Jiang Bei An Expressway. It starts from Laoqiao in Hexian, connects the Ma'anshan Bridge and Chuma Expressway, spans across the S226 Provincial Highway at 8km south of Hanshanxian, and finally joins with the Hechaowu Expressway. In the future, the Machao Expressway will also connect to Hechaowu Expressway and become the fastest route between Hefei and Ma'anshan.
The Machao Expressway was completed and commenced operation at the end of 2013. Moody's expects it will take 2-3 years before the expressway generates meaningful cash flows for Road Kong as it is relatively new.
Road King Infrastructure Limited is a listed company in Hong Kong with its core business in the investment, development, operation and management of toll roads and property projects in the People's Republic of China. Road King has invested in a toll road portfolio of approximately HK$4.2 billion, comprising 12 major toll road projects spanning approximately 732 kilometres in seven provinces of the PRC.